Wall Street gained ground on Thursday as the markets proved to be unfazed by sobering economic reports that revealed retail sales unexpectedly dropped last month as jobless claims rose further.
Today’s Markets
The Dow Jones Industrial Average rose 36.58 points, or 0.39%, to 9398.19, the Standard & Poor's 500 added 6.92 points, or 0.69%, to 1012.73 and the Nasdaq Composite picked up 10.63 points, or 0.53%, to 2009.35. The consumer-friendly FOX 50 gained 4.12 points, or 0.56%, to 736.84.
Concerns stemming from those worse-than-expected economic reports were countered by enthusiasm for Wal-Mart's (WMT) earnings beat and the government's successful sale of $15 billion of 30-year Treasury notes.
“I think we should be encouraged by the market action today. What could have been received as bad economic data is being overlooked and you are getting continued sponsorship of this market,” said Art Hogan, chief market strategist at Jefferies & Co.
The slight gains allow the bulls to tack onto Wednesday's 120-point rally, which came after the Federal Reserve decided to leave interest rates unchanged and said economic activity is "leveling out." The markets are now on track to end in the green for the fifth straight week amid optimism about the U.S. economy.
The Dow was led higher Thursday by gains of about 6% each from Bank of America (BAC) and Alcoa (AA). Nearly half of the index's 30 components lost ground, including United Technologies (UTX) and Caterpillar (CAT).
Thursday's rally was limited by a pair of downbeat reports on the U.S. economy, casting some doubt on Wall Street’s second-half recovery hopes.
The Commerce Department said retail sales fell by 0.1% in July, much weaker than the 0.7% rise economists had forecasted. Excluding auto sales, which received a boost from the government's "cash for clunkers" program, retail sales fell 0.6%. Despite the report, the retail sector avoided a knee-jerk sell off on Thursday. Shares of retailers like Sears (SHLD) and Abercrombie & Fitch (ANF) ended flat to slightly higher.
On the jobs front, the Labor Department said initial jobless claims rose by 4,000 last week to 558,000. Wall Street had been looking for a decline of 5,000. The government said continuing claims plunged by 141,000 to 6.2 million as unemployment benefits continue to be exhausted.
The negative domestic economic news stood in contrast to headlines out of Europe, where Germany and France surprised the markets by posting positive GDP figures. The basic materials sector on Wall Street rose in response as metals and mining stocks like Freeport-McMoRan (FCX) and AK Steel Holding (AKS) rose sharply.
The markets received a brief boost after the results of the Treasury Department said its 30-year auction received solid demand, capping off a successful week of bond auctions. The Treasury sales could help further ease fears on Wall Street about the government's ability to finance its growing debt load.
“Any concerns about the government’s ability to sell its longer maturity debt have once again been refuted,” Dan Greenhaus, chief economic strategist at Miller Tabak, wrote in a note.“Yesterday’s ten year and today’s thirty year auction have both gone quite well and have done so in the face of a powerful equity market rally.”
Wall Street also cheered Wal-Mart’s quarterly results, as the Dow component beat the Street with a profit of 88 cents per share despite a 1.2% decline in U.S. same-store sales. At the same time, Wal-Mart, which sells 10% of all goods in the U.S., upped the lower end of its full-year earnings guidance and forecasted an in-line profit for the current quarter.
On the commodities front, crude oil gained ground for the second day in a row but closed well off its highs. Crude settled at $70.52 a barrel, up 36 cents, or 0.51%.
Corporate Movers
Las Vegas Sands (LVS) soared 12% after the casino operator said it completed an amendment to its $3.3 billion Macau credit facility. The amendment increases the company's interest rates but gives it flexibility to sell a minority stake in its Macau operations.
Kohl's (KSS) disclosed a 3% drop in net income but the retailer’s EPS of 75 cents topped estimates. Kohl’s said net sales rose 2.2% but same-store sales fell 2.3%. At the same time, the department store chain upgraded its full-year guidance.
Urban Outfitters (URBN) reported a 14% decline in net income but the retailer’s EPS of 29 cents a share topped estimates. The company’s second-quarter sales rose by a better-than-expected 1% to $459 million even as its same-store sales tumbled 3%.
Estee Lauder (EL) reported a net loss in its latest quarter amid weak sales but the beauty products company’s adjusted-profit of 20 cents per share matched the Street’s view.Net sales tumbled by 16% to $1.68 billion, missing a $1.72 billion target.
DuPont (DD) unveiled plans to streamline its organization by consolidating its wide-ranging 23 businesses and eliminating five group vice president positions. The Dow component also named a new leadership team in the wake of the retirement of Richard Goodmanson, its chief operating officer.
E*Trade Financial (ETFC) tumbled 3% after hedge fund Citadel Investment Group said in a regulatory filing it plans to sell as much as 80% of its stake in the online brokerage.
Dr Pepper Snapple (DPS) easily beat the Street with a 46% jump in net income to 62 cents per share. The maker of Snapple and Mott's apple juice said its net sales tumbled 4% to $1.48 billion. Dr. Pepper also upgraded its 2009 profit outlook.
Data Dump
The Commerce Department said total business inventories tumbled by 1.1% in June, a larger increase than economists had called for and the 10th consecutive month of falling inventories. At the same time, business sales climbed by 0.9% to $975.8 billion in June.
Global Markets
European markets closed higher for the second straight day. London's FTSE 100 gained 0.82% to 4755.46, France's CAC 40 rose 0.49% to 3524.39 and Germany's DAX climbed 0.95% to 5401.11.
In Asia, Japan's Nikkei 225 closed up 0.79% to 10517.19, Hong Kong's Hang Seng rallied 2.08% to 20861.30 and China's Shanghai Composite jumped 0.89% to 3140.56.
Retail sales dip 0.1 percent in JulyAffiliated Computer Services Beats Street
