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Stocks rebounded from a midmorning slide Thursday after a report showed business inventories continued to shrink as sales jumped, offering the latest indication that the recession is winding down.
Investors have been juggling a mixed bag of news all morning: Wal-Mart beat earnings expectations but the other economic data was lousy.
A quick pop at the open quickly fizzled Thursday as the morning's news was mixed: Walmart beat earnings expectations but the economic data was lousy.
Stocks had rallied more than 1 percent Wednesday after the Fed's statement and an encouraging housing report.
Thursday's trading got off to a rocky start amid a technical glitch on the New York Stock Exchange. The exchange said customers "are currently experiencing issues" with acknowledgments of order entries, causing a delay in orders and trades.
Business inventories dropped 1.1 percent to a seasonally adjusted $1.35 trillion, helped by a 0.9-percent increase in sales. The inventory-to-sales ratio fell to 1.38 from 1.41. But jobless claims rose unexpectedly by 4,000 to 558,000.
A couple of retailers beat earnings expectations, including retail titan Wal-Mart.
Wal-Mart [WMT
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] reported a flat profit, as the strong dollar hurt the value of international sales and stimulus checks last year made for tough year-over-year comparisons, but still topped expectations.
And department-store chain Kohl's [KSS
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] narrowly beat estimates, helped by cheaply-priced and trendy merchandise.
But most other retailers skidded after the government reported its measure of retail sales slipped 0.1 percent, after increasing an upwardly-revised 0.8 percent in June. Economists had expected a 0.7-percent increase for July, helped by the "Cash for Clunkers" program.
“Many families postponed the bulk of their back-to-school shopping this year, possibly waiting to take advantage of their state sales tax holiday or hoping for additional discounts,” said Rosalind Wells, chief economist of the National Retail Federation. “Hopefully, retailers' aggressive promotions and reduced inventory levels will make for a better August and shield retailers from a disappointing season.”
Home Depot shares [HD
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] rose after Jefferies raised its price target on the stock to $32 from $29 and FBR raised its rating to "outperform" from "market perform."
Jefferies also raised its price target on Home Depot rival Lowe's [LOW
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], but FBR cut its rating on the stock to "market perform" from "outperform."
High-end retailer Nordstrom will report earnings after the bell.
Bank stocks led the board once again, with Bank of America [BAC
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] up more than 3 percent following news that hedge-fund titan John Paulson snapped up 168 million BAC shares.
CIT Group [CIT
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] jumped more than 10 percent after the lender said it has adopted a tax-benefits-preservation plan, a move designed to preserve shareholder value, and signed an agreement to report regularly to the Fed.
E*Trade shares [ETFC
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] skidded after Citadel Investment Group, the hedge fund that had injected capital into the struggling firm, said it would slash its investment in the company by more than two-thirds in the next few months.
In tech land, JPMorgan raised its price target for both Dell [DELL
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] and Hewlett Packard [HPQ
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]. Dell's target was raised to $13 from $10, while HP was lifted to $49.50 from $40.
Similarly, Barclays Capital raised its price target for Apple [AAPL
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] to $208 from $188, citing solid product pipeline such as the iPhone and prospects for strong free cash flow.
Europe's two biggest economies, France and Germany, posted surprise returns to growth in the second quarter, boosting investor optimism further.
German and French gross domestic product each rose by 0.3 percent in the second quarter. The consensus in a Reuters poll of economists had predicted a 0.3 percent quarterly contraction in both countries.
Still to come: Business inventories for June will be released at 10 am New York time, likely to have fallen by 0.9 percent.
And the Treasury completes a record $75 billion in auctions for the week by selling $15 billion in 30-year bonds today, with results due shortly after 1 pm New York time.
The major averages are now virtually unchanged for the week and could chalk up their fifth consecutive weekly gains with a rally Thursday and Friday.
- Peter Schacknow contributed to this report.
Still to Come:
THURSDAY: Treasury 30-year auction; Earnings from Nordstrom after the bell
FRIDAY: CPI; industrial production; consumer sentiment; Earnings from JCPenney
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