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Strong January retail sales failed to prevent a sharp fall in US stocks on Thursday.

Federal Department Stores, owner of Bloomingdale’s and Macy’s, Gap and Wal-Mart all reported higher monthly sales as shoppers were tempted out by warmer weather.

Federated Department Stores gained 4 per cent to $69.73 after it lifted earnings guidance, Gap rose 3.2 per cent to $18.55 as it delivered higher sales when the market expected a fall, while the popularity of youth clothing label Abercrombie & Fitch sent its shares 4.1 per cent higher to $69.27. Wal-Mart rose 0.3 per cent to $46.28 after its figures came in ahead of expectations.

While the wider market ended sharply lower, the S&P 500 retail index managed a gain of 0.2 per cent.

“The warm weather helped to bring people out and the use of gift cards” also boosted sales, said Marc Pado, chief market strategist at Cantor Fitzgerald. “The retailers posted good numbers, their guidance was good, and that’s why they are bucking the market.”

However, he said that concern remained about a consumer spending slowdown should the wealth effect from the strong housing market end.

In the wider market, stocks fell sharply as investors worried about an unexpected drop in productivity in the fourth-quarter and the effect on interest rates.

The Dow Jones Industrial Average closed down 0.9 per cent at 10,851.98, the broader S&P 500 fell 0.9 per cent to 1,270.84 and the Nasdaq Composite slumped 1.2 per cent at 2,281.57.

Disappointing earnings from Tyco International, the troubled conglomerate, and cable group Comcast also weighed on sentiment. Those stocks fell 5 per cent to $24.80 and 3.5 per cent to $27.02 respectively.

General Motors, off 3.7 per cent to $23.60, was the worst performer on the Dow after a downgrade from UBS, while carparts group Dana lost 8.4 per cent to $4.68 as the Securities and Exchange Commission began a formal inquiry into company’s accounting practices.

Dana is the worst performing S&P 500 stock this year, off 35 per cent.

United Airlines slumped 10.3 per cent to $35.89 on its first day of trading following its emergence from Chapter 11 bankruptcy.

There were some gainers. Starbucks, the coffee chain, jumped 9.7 per cent to $34.40 after it raised guidance on earnings following a record quarter and confirmed plans to open 1,800 new outlets this year.

Ashley Reed Woodruff, at Bear Stearns, raised her price target on the stock by $2 to $39-$40. “Starbucks is off to a strong start in 2006. We expect strong US sales growth and profit improvement internationally to continue to drive the shares going forward,” she said.

A sharp jump in quarterly profit boosted washing machine maker Whirlpool. Its shares rose 7.3 per cent to $86.37.

Copyright The Financial Times Limited 2017. All rights reserved.
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