Hong Ri Wu, 56, of San Francisco, allegedly fatally shot Feng Ping Ou, a 30-year-old woman, and Qiong Han Chu, a 30-year-old man, inside the souvenir and luggage shop where they worked at 269 Jefferson St. at about 8:20 p.m. Sunday, according to police.
"He's being held under psychiatric observation," San Francisco sheriff's spokeswoman Eileen Hirst said today.
Arraignment on two counts of murder, with allegations of firearm use and multiple murders, was postponed until Friday. Wu is being held without bail.
The shooting is believed to have been precipitated by a dispute over the sale of similar merchandise, police said.
According to prosecutor Braden Woods, who heads the district attorney's office homicide unit, Wu had worked in a similar souvenir shop next door.
Woods today said independent witnesses to Sunday's homicides indicated the alleged gunman walked into the neighboring shop, shot Ou once and then went to the back of the store, where he shot Chu multiple times.
The gunman then told two other people inside the store that they could leave, Woods said.
Woods called the killings "brutal, senseless, calm."
Wu was arrested just outside the shop, and a semiautomatic handgun was found next to him, Woods said.
Family members of both victims attended this morning's brief hearing in court.
Woods said the relatives were "very upset."
The special circumstance allegation of multiple murders make the case eligible for the death penalty, but a decision has not yet been made whether to pursue it, according to the district attorney's office.
Last year, a federal counterfeiting investigation at several shops in the Fisherman's Wharf area resulted in the indictments of several store owners.
Woods said San Francisco investigators are now working with federal authorities to try to determine whether there may have been any counterfeiting operation involved in this case.