Retail stocks were among the losers in a wild session on Wall Street on Thursday as the market took scant comfort from better-than-expected sales figures.
However, the benchmark S&P 500 index finished in positive territory after jumping by 3.2 per cent in the final hour of trading on a Reuters report that the Obama administration was working on a move to subsidize mortgage payments for troubled homeowners.
The S&P had lost as much as 3.1 per cent as analysts warned that the apparently upbeat retail sales data had been skewed by seasonal swings and investors focused instead on the latest downbeat unemployment data and earnings reports.
The decline left the index only 3 points away from a fresh low for the year, but traders were relieved late in the session that the market did not cross the key technical support level.
The major indices finished at the break-even line: the S&P closed 0.2 per cent higher at 835.19 and the Dow Jones Industrial Average 0.1 per cent lower at 7,932.76. Strength in the technology sector helped the Nasdaq Composite Index close up 0.7 per cent at 1,541.71.
Tiffany and Target shed 2.1 per cent to $20.57 and 2.8 per cent to $30.85, respectively, in spite of a Commerce Department report that showed retail sales unexpectedly rose in January for the first time in six months.
The retail sector losses came even though the headline figure rebounded 1 per cent, while economists had forecast a decline of 0.8 per cent.
Although the data also appeared upbeat when excluding motor vehicles and parts – sales rose 0.9 per cent on this basis against expectations of a 0.4 per cent decline – analysts highlighted that the previous month was revised downwards and suspected the supposed recovery was little more than a statistical anomaly.
“Don’t believe the headlines,” wrote Joshua Shapiro, chief US economist at MFR, in a note to clients. “January’s results by no means suggest that the consumer is on the road to recovery.”
Kohl’s was the biggest loser in the sector after Goldman Sachs added the stock to its “conviction sell” list. The shares lost 3.7 per cent to $36.54.
The consumer staples sector outperformed, helped by better-than-expected quarterly earnings from Coca-Cola, which rallied 7.6 per cent to $44.39 on better-than-expected quarterly profits. The sector was the best performing on Thursday, up 1.2 per cent overall.
Financials were the worst performing, down 1.3 per cent overall, on persistent concerns over the Obama administration’s rescue plans for the sector even though Tim Geithner, Treasury secretary, hit back at criticism that the proposals lacked detail.
Wells Fargo fell 4 per cent to $16.80. Illustrating the scale of the volatility, JPMorgan fell as much as 7.4 per cent but closed up 0.4 per cent at $26.19.
NYSE Euronext was among the victims, off 3.8 per cent to $19.82 after Citigroup downgraded its view of the stock to “hold”.
“Sentiment for market structure stocks remains fairly negative due to concerns around volume trends, hedge fund de-leveraging, reduced risk appetite and bank consolidation,” wrote Donald Fandetti, Citi analyst, of the sector. “While there have been some signs of a thaw and more aggressive government action, we believe a true recovery will simply take some more time.”
Homebuilders were among the biggest losers, down 3.5 per cent overall after National Association of Realtors data showed prices of existing single-family homes tumbled by a record 12.4 per cent in the fourth quarter
Downbeat labour market data – the four-week moving average for initial jobless claims rose to the highest level since 1982, while total unemployment benefits rose for a fourth straight week to near the 5 million mark – also weighed on the market.
“The jobless claims number is the one that traders really care about,” said Joe Kinahan, chief derivatives strategist at thinkorswim, who downplayed the significance of the retail figures. “It’s forward looking.”
The lower oil price hurt the energy sector, which spent much of the session in the red although found positive territory by the close.
In other earnings news, Viacom rallied 3.9 per cent even to $17.70 even after the media group disclosed a sharp decline in fourth-quarter profit.