Reuters
Stocks Fall on Rate-Hike Fears After Data
Tuesday April 13, 10:21 am ET
NEW YORK (Reuters) - U.S. stocks declined on Tuesday, reversing earlier gains, after a surprisingly strong retail sales report raised fears that the Federal Reserve may raise interest rates sooner than expected.
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The fall came despite solid earnings from blue-chip stocks like brokerage Merrill Lynch & Co. and drugmaker Johnson & Johnson.
Retail sales rose an unexpectedly sharp 1.8 percent in March to a seasonally adjusted $333.01 billion, the biggest gain since March 2003, the government said. Stripping out auto sales, sales gained 1.7 percent, that category's best showing since March 2000.
The gains surpassed Wall Street estimates, which had seen both figures advancing just 0.6 percent. February sales were also revised upward.
Bond prices slid and yields rose, leading financial markets to price in a greater likelihood of an early interest rate hike, traders said. The dollar extended its gains after the retail sales report.
"Part of the worry is you have real interest-rate creep here. Bonds are getting banged around here and the yield on the 10-year looks like it wants to head higher, which is going to put a cap on things for time being," said John O'Donoghue, co-head of listed trading at Credit Suisse First Boston.
The major market indexes rose strongly at the open, but soon fell into the red. The Dow Jones industrial average (^DJI - News) slipped 4.83 points, or 0.05 percent, at 10,510.73. The Standard & Poor's 500 Index (CBOE:^SPX - News) eased 1.62 points, or 0.14 percent, to 1,143.58. The technology-laced Nasdaq Composite Index (NasdaqSC:^IXIC - News) was down 2.25 points, or 0.11 percent, at 2,063.23.
Time Warner Inc. (NYSE:TWX - News) was among the New York Stock Exchange's (News - Websites) most actively traded issues, driven by news that U.S. securities regulators are preparing to formally accuse the media company of improperly booking more than $400 million in advertising revenue. Time Warner shares shed 12 cents, or 0.7 percent, to $17.25.
Johnson & Johnson (NYSE:JNJ - News) shares rose after it reported a 20 percent jump in first-quarter earnings, lifted by higher prescription drug sales and revenue from its new drug-coated stent.
J&J shares rose 40 cents, or 0.80 percent, to $51.60. The company also raised its 2004 earnings outlook due to the first-quarter's strong performance.
Merrill Lynch & Co. (NYSE:MER - News) shares declined even after it reported its first-quarter profit nearly doubled, helped by debt market activity and strength in investment banking operations. Shares of Merrill, one of the biggest U.S. brokerages, were off 40 cents, or 0.6 percent, to $59.40.
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