OT:Stocks seesaw after mixed retail-sales reports
Wal-Mart's profit forecast had bumped up stocks
NEW YORK - Stocks soared and bond prices fell Thursday after Wal-Mart Stores Inc. raised its profit forecast and several other retailers managed to put up better-than-expected sales.
While overall monthly sales reports were sluggish, Wall Street appeared relieved that some retailers were able to extract stronger sales even as consumers face uncertainty about the economy, higher fuel prices and, in large portions of the country, unseasonably warm weather.
Wall Street views robust consumer spending, which accounts for about two-thirds of economic activity, as crucial for holding up the economy.
The latest government economic reports also appeared to please investors. New readings showed a steeper-than-expected drop in the U.S. trade deficit and a decline in weekly unemployment claims.
Wall Street's gains Thursday vaulted the Dow Jones industrial average and the Standard & Poor's 500 index into record trading highs early in Thursday's session.
"Expectations have gotten very low on the Street and I think there are signs that we're in a bull market right now because bad news is interpreted as good news and good news is being interpreted as really good news," said Nicholas Raich, director of research at National City Private Client Group in Cleveland.
In early afternoon trading, the Dow rose and set a new trading high of 14,197. The blue chip index, after finishing lower Wednesday, passed its earlier trading high of 14,166.97 and a record close of 14,164.53, set Tuesday.
Broader stock indicators also rose. The Standard & Poor's 500 index advanced to a new trading high of 1,576; its previous trading high was 1,565.42. It also surpassed the record close of 1,565.15 it had on Tuesday
The Nasdaq composite index, which has touched nearly seven-year highs in recent sessions, also advanced.
Bonds fell sharply following the economic data, with the yield on the benchmark 10-year Treasury note rising late Wednesday. The dollar was mixed against other major currencies, while gold prices rose.
Light, sweet crude rose on the New York Mercantile Exchange after the government reported an unexpected drop in crude oil inventories and a surprise increase in refinery activity and in gasoline and heating oil supplies.
Stocks of energy companies rose Thursday as is often the case when oil prices move higher. However, recent months have brought tighter margins for oil producers as gas prices haven't kept pace with the run-up in oil. The moves in prices means that while it costs companies more to acquire the oil, they're fetching less for the gasoline they produce.
Exxon Mobil Corp. rose, while ConnocoPhillips gained.
Corporate news seemed to draw much of investors' attention Thursday. Raich contends investors' expectations for overall profit growth at companies are now too low for the third quarter.
"People were just focusing on the homebuilders and the financials. When you're going to look at the overall makeup of the S&P 500, 40-50 percent of profits come from overseas sales where economies are stronger," he said.
In economic news, the U.S. trade deficit fell to its lowest level in seven months — a much better reading than Wall Street expected — amid record sales of American products. Several high-profile recalls dented imports from China.
The Commerce Department said the deficit declined to $57.6 billion in August, down 2.4 percent from the July imbalance.
Exports rose 0.4 percent to a record $138.3 billion, while imports dropped by 0.4 percent to $195.9 billion.
A weakening dollar makes U.S. exports more competitive abroad.
Meanwhile, the number of newly laid off workers seeking unemployment benefits dropped last week, a better showing than Wall Street had expected. Labor Department figures showed applications for jobless benefits fell by 12,000 to 308,000 last week, rather than staying flat as had been expected.
Looking at the economy, Federal Reserve Governor Randall Kroszner said in prepared remarks for a speech Thursday that the central bank's decision to cut short-term interest rates by a larger-than-expected half percentage point was expected to be "appropriate to offset the effects of tighter financial conditions on the economic outlook."
While overall retail sales reports were sluggish, Wall Street cheered Wal-Mart's announcement. The world's largest retailer raised its third-quarter profit forecast even after reporting its same-store sales, or sales at stores open at least a year, rose a weaker-than-expected 1.4 percent in September.
Wal-Mart, the biggest advancer among the 30 stocks that make up the Dow industrials, jumped.
TJX Companies Inc. rose after the parent of the T.J. Maxx and Marshalls chains turned in a 2 percent increase in its September same-store sales.
J.C. Penney Corp., fell after cutting its third-quarter profit forecast after the department store operator turned in same-store sales figures that fell well short of Wall Street's expectations.
Aeropostale Inc., the teen apparel retailer, turned in a gain rather than a decline in same store sales as Wall Street had expected. the stock rose.
PepsiCo, the world's second-largest soft drink maker, reported its third-quarter earnings rose 17 percent amid double-digit growth in international sales. The stock, which is up nearly 20 percent for the year, fell.
Medtronic Inc. rose after its drug-coated stent Endeavor moved past a big regulatory hurdle as a panel of government experts recommended the Food and Drug Administration approve the artery-opening device.
Shares of General Motors Corp. hit a 52-week high in their first day of trading after union members ratified a new contract with the automaker.
Advancing issues outnumbered decliners by about 2 to 1 on the New York Stock Exchange.
The Russell 2000 index of smaller companies rose.
Overseas, Japan's Nikkei stock average closed up 1.64 percent after a rating agency upgraded the country's debt. Stocks in Europe also rose amid upbeat sentiment about access to credit and after Telefonica SA, the Spanish telecommunications company, said it would pay a one euro dividend. In afternoon trading, Britain's FTSE 100 rose, Germany's DAX index advanced, and France's CAC-40 rose.
AI
