Sluggish Retail Sales Prompt Profit Taking
Financial markets Thursday braced for today’s November employment report, as stocks ended mixed and long-term bond yields rose despite another big drop in oil prices.
Disappointing retail sales figures and a surprise jump in initial unemployment claims spurred some investors to take profits in equities.
Bonds were buffeted by inflation worries. The yield on the benchmark 10-year Treasury note rose as its price declined for a seventh straight session, its longest slump this year.
The dollar gained against key currencies. Gold prices fell.
On Wall Street, the Dow Jones industrial average edged down 5.10 points, or 0.1%, to 10,585.12 even as near-term crude oil futures in New York slid $2.24 to $43.25 a barrel, the lowest price since Sept. 10.
The Dow had soared more than 162 points on Wednesday when oil slumped $3.64 a barrel after the government reported another weekly rise in U.S. crude inventories -- further allaying supply concerns that had driven oil above $55 a barrel in October.
Some stock investors appeared to be taking their cue from November retail sales reports. Retailers including Federated Department Stores and Gap posted unexpected declines in sales just as the all-important holiday shopping season moved into full swing.
With economic growth largely dependent on consumer spending, many investors were counting on stores to boost the economy through the end of the year.
“Obviously, retail sales are a major concern going forward, but the falling oil prices will definitely help the market,” said Michael Sheldon, chief market strategist at Spencer Clarke. “If we can stabilize around the $40 level, we’ll see a pretty good year-end rally in stocks.”
Key market indexes were mixed. The Standard & Poor’s 500 index slipped 1.04 points, or 0.1%, to 1,190.33 after reaching a three-year high Wednesday. The Nasdaq composite rose 5.34 points, or 0.2%, to 2,143.57.
Some investors were nervous after the Labor Department reported a sharp rise in first-time unemployment claims last week. That set the stage for today’s report on November employment.
Treasury bond yields rose as some traders squared their books ahead of the employment report, analysts said. The 10-year T-note yield climbed to a four-month high of 4.41% from 4.36% on Wednesday.
The bond market was ruffled after a Wall Street Journal story said some Federal Reserve policymakers feared that inflation pressures were building in the economy. That could cause the central bank to raise short-term interest rates at a faster pace.
In other market highlights:
* The dollar rallied after first dropping to another record low against the euro and hitting its lowest point in five years against the yen. Traders attributed the dollar’s comeback to profit taking on the foreign currencies and to expectations that today’s employment news might be better than expected, bolstering the outlook for the U.S. economy.
The euro traded at $1.327, down from its record high of $1.332 on Wednesday.
* Gold, which has benefited from the weak dollar, pulled back. Near-term futures in New York lost $3.60 to $450.40 an ounce.
Gold mining stocks were sharply lower as the metal slid. Barrick Gold dropped 86 cents to $24.04 and Newmont Mining fell $1.30 to $45.87.
* Energy stocks sank for a second day as oil prices fell. Exxon Mobil lost 98 cents to $50.17, ChevronTexaco declined $1 to $52.48 and ConocoPhillips tumbled $3.33 to $85.95.
“The rise in crude has been so long in duration and price that it’s drawn more and more people” into buying energy stocks, said David Rolfe of Wedgewood Partners. Some may be rushing to take profits now, he said.
* It was a bad day for many other commodity-related stocks. Steel shares fell after Prudential Equity cut its rating on U.S. Steel to “underweight” from “neutral,” citing the stock’s gains this year. U.S. Steel slumped $2.27 to $49.95.
Among other commodity issues, nickel miner Inco fell $1.21 to $36.16 and fertilizer producer Potash slid $1.72 to $77.49.
* Key retailers retreated on weak or disappointing sales reports. Federated Department Stores, which owns Macy’s and Bloomingdales, eased 15 cents to $55.07. Gap lost 85 cents to $21.63 and Nordstrom was down $1.35 to $43.25.
* KB Home fell $1.77 to $88.55 but ended above its lows for the day after the company said it would raise its dividend 50% and split its shares 2 for 1.
* Apple Computer, whose shares have tripled this year, fell $2.58 to $65.21. The iPod maker was cut to “hold” from “buy” by an analyst at Smith Barney.
