Last updated: January 6, 2011 10:01 pm

Retail sales report weighs on US stocks

Gap, Target and Macy’s were among the retail stocks that fell after weak festive holiday trading but positive news from the jobs market helped US stocks pare losses.

The final verdict on retailers’ holiday shopping season was disappointing as many large chains missed their estimates.

Retail Metrics said its index of same-store sales had risen 3.2 per cent against analysts’ forecasts for a 3.5 per cent gain.

The S&P 500 retail index fell 1.6 per cent while the wider consumer discretionary sector sank 0.7 per cent. The consumer discretionary index was the biggest riser in 2010 and its retail component surged towards the end of the year in anticipation of a bumper shopping season.

“Retail sales were kind of a dampener,” said Randall Warren, chief investment officer at Warren Financial Services. “But the market is not too worried about it, probably because the Christmas season was quite good. It was just the snow in the north-east at the end of December that kept the shoppers away.”

Target , the discount retailer, tumbled 6.8 per cent to $54.93 after its sales only edged up 0.9 per cent compared with the average analyst estimate of a 3.9 per cent gain.

But TJ Maxx , which offers discount designer clothes, added 5.9 per cent to $45.52 after it unexpectedly reported a rise in same-store sales.

Department store Macy’s dropped 4 per cent to $23.97 after it said sales rose 3.9 per cent in December, less than the 4.5 per cent predicted.

Rival Saks added 4.6 per cent to $11.50 after it reported a rise of 11.8 per cent, which was better than analysts’ forecasts.

Clothing retailer Gap dropped by 6.9 per cent to $20.70.

The S&P 500 closed down 0.2 per cent to 1,273.85, the Dow Jones Industrial Average also closed 0.2 per cent lower at 11,697.31.

But the Nasdaq Composite edged up 0.3 per cent to close at 2,709.89. as a decision by Microsoft to use a different processor in the next version of its Windows operating system buoyed some technology stocks.

Microsoft climbed 2.9 per cent to $28.82, while the makers of ARM processors also gained. Nvidia soared 13.8 per cent to $19.33, while Qualcomm added 1.2 per cent to $52.67 and Texas Instruments gained 1.4 per cent to $33.25.

Intel , which used to dominate the processor market, fell 0.8 per cent to $20.77.

Initial jobless claims edged up by 18,000 to a total of 409,000 last week, but the number of people continuing to claim unemployment benefits fell. The report was slightly better than average forecasts.

“The average level of initial claims in December was the lowest monthly average since July 2008 and this, combined with other labour market readings for the month, leaves us comfortable with our forecast for a 175,000 increase in private payrolls in December,” said John Ryding of RDQ Economics.

Telecoms stocks led the fallers, down 2.8 per cent, after Metro PCS announced its fourth-quarter subscriber results, which missed expectations, sending its shares tumbling 6.7 per cent to $13.30.

Metro’s rivals also fell, with AT&T down 1.4 per cent to $29.15 and Verizon losing 2.6 per cent to $36.23.

US-listed shares in BP dipped 0.6 per cent to $46.23 after rising in the session. The official US inquiry into the Gulf of Mexico oil spill concluded that systemic failures by the management of BP and other companies led to the Macondo well blow-out.

Transocean and Halliburton , contractors on the project, were also criticised by the report. Transocean edged down 0.3 per cent to $73.04 but Halliburton lost 3 per cent to $38.22.

The S&P 500 energy index, which has suffered this week as the oil price fell, dropped 0.7 per cent.

Coal producer Massey Energy sunk 3.1 per cent to $54.65 even though it said fourth-quarter coal shipments were lower than it had previously projected.

Moody’s, the credit rating agency, jumped 8.6 per cent to $29.67 after it raised its earnings forecast for 2010 to at least $2.08 per share from a previous maximum of $1.96. It said strong bond market issuances had boosted profit as the agency rates the bonds.

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