Stocks Struggle as Dollar Gains; Sears Rallies

Stocks struggled Thursday as the dollar rose, putting pressure on stocks that outweighed encouraging reports on employment and retail sales.

The Dow Jones Industrial AverageandS&P 500attempted to claw higher, while the Nasdaq was firmly negative.

The big economic news of the day came as the Labor Department reported jobless claims last week rose by just 1,000 to 434,000, less than expected. The four-month moving average, which smoothes out volatility from the weekly numbers, hit a 16-month low.

This report puts the decline in jobless claims near their cycle lows for this recovery period, said Robert Brusca, chief economist at FAO Economics.

"[T]his recovery LOOKS ABSOLUTELY, POSITIVELY, NOTHNG that is N-O-T-H-I-N-G like those two previous slow jobs recoveries after recessions in 1990 and in 2001," Brusca wrote in a morning note to clients. "The path of jobless claims points to a ROBUST period of job growth ahead — not to a sluggish one."

But investors took a wait-and-see approach ahead of Friday's jobs report, leaving stocks flat.

The dollar hit a four-month high against the yen, sending oil and other commodity prices lower.

Alcoa was the biggest drag on the Dow after after Citigroup cut its rating on the stock to "hold" from "buy." The downgrade comes just four days before the aluminum giant kicks off fourth-quarter earnings reports and was based on valuation and currency headwinds.

Bank of America led Dow gainers as Credit Suisse upgraded the company to outperform from neutral, saying BofA is the "cheapest" of the large-cap banks it covers.

Retailers released their December sales figures this morning, which beat expectations despite the still-cautious nature of consumers.

Sears led gainers on the the S&P and Nasdaq after the company, which doesn't usually release monthly sales figures, raised its fourth-quarter and fiscal-year forecast amid strength at its Kmart chain. Sears reported same-store sales rose 0.4 percent in December, as Kmart sales jumped 5.3 percent.

Bed Bath & Beyond was also running at the front of the S&P and Nasdaq packs as the retailer blew past forecasts and delivered a bullish full-year outlook.

Costco reported a 9-percent increase in same-store sales, beating analyst estimates of 7.9 percent, but its shares skidded.

Limited Brands also raised its fourth-quarter outlook, while teen chain Aeropostale said sales tumbled 11 percent.

Homebuilder Lennar reported its first quarterly profit in three years, sending shares up more than 10 percent. The Dow Jones Home Construction Index gained nearly 5 percent in early trading.

Vivus shares jumped after the company reported positive test results for its sleep apnea drug.

The Consumer Electronics Show in Las Vegas is already generating some headlines: Microsoft has unveiled a Windows-based tablet computer made by Hewlett-Packard and Sony said holiday sales beat its forecasts.

Winterizing Your Portfolio - A CNBC Special Report
Winterizing Your Portfolio - A CNBC Special Report

Texas Instruments is planning to enter the burgeoning e-reader market, according to the Wall Street Journal. It will make new processors and software for manufacturers of those increasingly popular devices.

The fight over Cadbury continued as well, with the company's stock for the first time dipping below the offer from Kraft Foods as the likelihood of a rival bidder diminishes.

Despite the lower opening fear continued to take a holiday, with the Chicago Board Options Exchange's Volatility Index at a 14-month low.

The Bank of England kept its key rate steady at 0.5 percent.

Still to Come:

THURSDAY: Consumer Electronics Show; Fed's Hoenig speaks
FRIDAY: Jobs report; wholesale trade; Fed's Lacker speaks; consumer credit

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