Disappointing Retail Sales

Elena
02 Mar, 2006
New York City

Stocks opened lower Thursday as retailers reported mixed February sales and energy supply threats sent oil prices higher. Among retailers posting strong results, Costco reported 7% same-store sales growth, Nordstrom comparable store sales rose 4.9%, and Wal-Mart sales increased 3.2%. Gap announced same-store sales decline of 11%. Talbot posted 6% sales drop. Bebe had a 1.6% gain in same-store sales, below the 4.6% estimate.

U.S. MARKET AVERAGES

U.S. stocks opened in the negative, reflecting oil prices increase and disappointing sales reports from some retailers.

In Nigeria threats of renewed violence pushed up oil prices, hurting the outlook for U.S. corporate profits and consumer spending. Crude oil futures were up 55 cents to $62.52 in electronic trading.

Several chain stores reported disappointing sales last month due to lower consumer spending on snowstorm and freezing temperatures in the Northeast.

Gap announced same-store sales decline of 11%. Talbot posted 6% sales drop. Bebe had a 1.6% gain in same-store sales, below the 4.6% estimate. New York & Company Inc. reported a decline in February same-store sales and gave a sales and earnings outlook for Q1 that fell far below analysts' estimates.

Among retailers posting strong results, Costco reported 7% same-store sales growth, Nordstrom comparable store sales rose 4.9%, and Wal-Mart sales increased 3.2%.

Utility stocks were pressured by rising trasury yields. The Dow Jones Utilities Average fell nearly 1%. Bank stocks were also weak in the early going.

Supported by rising oil prices, energy stocks were among the best performers in early going. The oil service sector stood out in the group, rising by about 1.5%. The gold sector also moved to the upside, up nearly 1%. The computer hardware sector posted modest gains as well.

The Dow Jones industrial average was down 37.14 points, or 0.34%. The Standard & Poor's 500 Index was down 4.72 points, or 0.37%. The Nasdaq Composite Index was down 6.82 points, or 0.29%.

Treasury yields edged higher in the opening stages of Thursday's trading. The 10-year yield rose 2.5 basis points to 4.614%.

ECONOMIC NEWS

The Department of Labor reported that the initial jobless claims in the week ended February 25 rose to 294,000 from the previous week''s revised figure of 279,000. Economists had expected jobless claims to rise to 285,000 compared to the 278,000 originally reported for the previous week.

Despite the increase, initial jobless claims remained below 300,000 for the seventh consecutive week. A reading consistently below 300,000 is said to indicate strength in the labor market.

The Labor Dept. also said that the four-week moving average rose to 287,250 from the previous week''s revised average of 282,000. The less volatile moving average has moved higher in two of out of the past three weeks after trending lower for the six weeks prior.

Additionally, the report showed that continuing claims fell to 2.486 million in the week ended February 18 from the preceding week''s revised level of 2.488 million.

While the bigger than expected increase in jobless claims may raise some concerns about next week''s February employment report, it may also help to ease investor worries that a tight labor market will lead to higher inflation and a continued increase in interest rates.

Economists expect the February employment report to show that the U.S. economy added 200,000 jobs during the month following a smaller than expected increase of 193,000 in January.

At the same time, the unemployment rate is expected to edge up to 4.8 percent from the four and a half year low of 4.7 percent that it set in January.

INTERNATIONAL MARKETS NEWS

Asian-Pacific benchmarks finished mixed on general recovery of the tech sector after the selloff earlier in the week and ahead of Japan CPI data. The Nikkei advanced in the morning but eventually ended down 0.3% as investors focused on economic data due out Friday. Shanghai Composite plunged 1.6%, South Korea’s Kospi fell 0.4%, while Australia’s All Ordinaries surged 1.1%, followed by Hong Kong’s Hang Seng, up 0.4%.

European stocks recovered from early losses as the European Central Bank raised its key interest rate by a quarter of a point. Positive news from Deutsche Telecom and Aviva also provided support. The German DAX 30 was slightly down at 5,864, the French CAC 40 added 0.1%, and London’s FTSE 100 gained 0.4%.

OIL, METALS, CURRENCIES

Crude oil prices climbed above $62 on global supply concerns, despite another rise in U.S. oil inventories. Light sweet crude April delivery gained 74 cents to $62.71 a barrel. Gasoline gained 1 cent to $1.6400. Heating oil added 2 cents to $1.7650. Natural gas rose 5 cents to $6.780 per 1,000 cubic feet. London Brent for April delivery added 76 cents to $63.21 a barrel.

European gold prices climbed to a three-week high on weakening dollar. Gold for immediate delivery rose $1.37 to $564.32 per troy ounce. Silver gained 6 cents to $9.81.

The U.S. dollar weakened against the euro as the European Central Bank raised its key interest rate to 2.5%. The euro traded at $1.1935, up from $1.1923.