Index sags, with retailers under the pump

The market remained in the red for the whole session after Wall Street resumed its slide overnight following a one-day respite.

The S&P/ASX 200 Index finished 17.2 points lower, or 0.38 per cent, at 4473.5 almost where it began.

The consumer discretionary index dropped 0.86 per cent to finish at 1284 points, its lowest result for the week. AMP Capital chief economist Shane Oliver said David Jones's announcement on Wednesday that it had slashed its sales and profit guidance continued to weigh on retail stocks.

Dr Oliver said investors were also worried about economic instability in Europe and stalling negotiations over the US debt ceiling.

Retailers faced many pressures that were pushing down the consumer discretionary index,

he said.

"Wages and rents are rising in line with inflation . . . those key costs are going up. I think in the next few months it will be a pretty hard slog for retailers."

Dr Oliver said he expected retail equities to rise in the lead-up to the Christmas spending period. "There's plenty of scope for a rebound but I find it hard to see consumer spending picking up any time soon."

However, in the long term he saw retailers remaining under pressure. "I don't see a return to the strength in retail prior to the global financial crisis," he said.

BT Financial chief economist Chris Caton said that in the past five years Australian consumers had shown a tendency to save their disposable income. The household savings ratio reached 11.5 per cent in the latest quarter, the highest savings rate since the mid-1980s.

David Jones fell 5? to $3.15 while Myer shed 5? to $2.43. Woolworths lost 5?, finishing at $27.35.

BHP Billiton was down 71? to $42.89 and Fortescue dipped 1? to $6.41. Rio Tinto went against the tide, climbing 41? to $81.36.

Three of the big four banks closed lower. CBA ended steady at $49.02 but ANZ lost 20? to $20.78, NAB 6? to $23.40 and Westpac 19? to $20.58.