Stocks ended mixed as dismal December retail sales — notably from discount giant Wal-Mart — offset strength in techs, led by Microsoft.
The Dow Jones Industrial Average ended down about 30 points, or 0.3 percent. The S&P 500 and Nasdaq ended higher.
Wal-Mart led the Dow's decline, falling 8.5 percent, after the discount giant missed its December sales target and slashed its earnings forecast. The stock was one of only two Dow industrial gainers last year and had been considered an oasis amid a desert of retail — and economic — despair.
The fact that Wal-Mart, which had been faring better than other retailers as cash-strapped shoppers flocked to the chain to take advantage of its low prices, delivered the biggest surprise was a telling sign of the season.
Analysts said it's an indication that the economy is in worse shape than previously thought.
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Losses were mitigated somewhat by better-than-expected weekly jobless claims even though continuing claims rose and analysts estimated that Friday's monthly jobs numbers could show more than half a million jobs cut from payrolls in December and a jump in the unemployment rate to 7 percent.
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Microsoft gained 3.1 percent, buoying the Nasdaq and helping to pare losses on the Dow ahead of the test rollout of its Windows 7 software Friday.
At the same time, shares of Intuitive Surgical tumbled 6.2 percent on the Nasdaq as the company said its quarterly profit rose 22 percent, but below analyst expectations.
On the upside, Sears Holding shares soared 2 percent even as the company reported December sales that dropped 7.3 percent. The silver lining for the ubiquitous retailer was Kmart, which saw a drop of only 1.1 percent that company officials attributed to its aggressively promoted layaway plan.
Wal-Mart wasn't alone in reporting December sales that fell short of expectations.
Costco Wholesale reported a 4 percent fall in sales at stores open at least a year in December, hurt mainly by lower gas prices and foreign exchange losses. Same-store sales in the U.S. fell 2 percent, while international division sales fell 11 percent. Its shares rose 1.1 percent.
Also in retail, Macy's slashed its earnings forecast and said it plans to close 11 stores.