Technology shares led indexes into the red. While Wal-Mart posted strong September sales, many other retailers weren't so fortunate
After indexes hit new intraday records early on Thursday, stocks reversed course late in the day to end lower.
Market experts gave credit for the early rally to a narrower U.S. trade deficit in August and strong sales at retail giant Wal-Mart (WMT) in September. The subsequent reversal was blamed on profit taking and news that a JP Morgan (JPM) analyst had lowered revenue estimates for Baidu.com (BIDU). The Chinese search-engine firm's high-flying stock fell from an all-time high, ending the day down 10%.
Action Economics also said some observers cited hawkish remarks from a European Central Bank official on restrictive monetary policy as a catalyst for the late afternoon selloff. A fresh spike in oil prices to above $83 per barrel, and weak results from other retailers, may have also weighed on sentiment.
On Thursday, the Dow Jones industrial average fell 63.57 points, or 0.45%, to 14,015.12. The broader S&P 500 index shed 8.06 points, or 0.52%, to 1,554.41.
The tech-heavy Nasdaq composite index declined 39.41 points, or 1.4%, to 2,772.20. Along with Baidu.com, tech players Apple (AAPL), Amazon (AMZN), Google (GOOG) and Research in Motion (RIMM) all lost ground.
On the New York stock exchange, for every 20 stocks falling, 13 rose in price. On the Nasdaq, the ratio was 20-13 negative. Volume was heavy, which Standard & Poor's Marketscope says suggests selling by institutional investors.
The U.S. trade deficit narrowed to $57.6 billion in August, down from a revised $59 billion shortfall in July. The deficit with China fell to $22.5 billion, vs. $23.8 billion in July.
Also Thursday, investors learned that U.S. jobless claims fell 12,000 last week to 308,000. Other economic reports showed U.S. import prices climbed 1% in September, while export prices edged up 0.3%. Import prices from China were up 0.2%.
"The deficit is narrower than expected, and in conjunction with the drop in jobless claims and spurt higher in import prices, should add to upward pressure on Treasury yields and the dollar," says Action Economics.
Investors were positioning for Friday's reports on September retail sales and producer prices.
Crude oil for November delivery climbed $1.78 to $83.08 a barrel Thursday after a Dept. of Energy report showed crude oil stocks fell 1.2 million barrels to 320.6 million barrels in the week ended Oct. 5. Inventories are above the upper end of the average range for this time of year.
Gold for December delivery soared $10.70 to a 28-year high of $756.70 an ounce as the dollar index fell despite the improved trade deficit news.
Retailers were making the biggest headlines Thursday as September sales gave the markets insight into the mood of the U.S. consumer.
Wal-Mart Stores offered some of the best news. The giant retailer reported 6.4% higher same-store sales. It expects October same-store sales to be between flat and a 2% increase. It raised its earnings guidance for the third quarter by four cents per share. Shares were up 2.87% to $46.90.
BJ's Wholesale Club (BJ) said same-store sales rose 3.9% and total sales jumped 8.6%.
Other retailers had much weaker results last month. J.C. Penney Co. (JCP) reported 4.6% lower same-store sales and 1.2% lower total department store sales. It also cut its third quarter earnings guidance.
Abercrombie & Fitch Co. (ANF) reported same-store sales fell 4% and total sales rose 1%.
The Gap (GPS) said same-store sales dropped 7% and total sales were 3% lower.
Macy's (M) saw same-store sales drop 2.7% as total sales fell 1.1%.
Ann Taylor Stores (ANN) said same-store sales edged up 0.5%, and total sales surged 6.2%.
Nordstrom (JWN) cut its third quarter earnings forecast by 11 cents while reporting 3.2% higher same-store sales and a 4.1% total sales rise.
Department stores on the S&P 500 index fell 3.88% on Thursday, while hypermarkets and super centers, a group that includes Wal-Mart, was up 2.22%.
Auto makers were helped by news on new labor deals for General Motors (GM) and privately owned Chrysler. Shares of Ford (F), which still must negotiate a deal with the United Auto Workers, rose 6.44% on Thursday to close at $8.76. As a group, automobile manufacturers were up 4.57%.
Also in the news, homebuilder Beazer Homes USA (BZH) said the number of preliminary home closings fell 39% last quarter from a year ago and new home orders fell 52%. It blamed the high cancellation rate on tightening in the mortgage markets. Beazer also said it would restate financial results for fiscal years 2004 through 2006.
PepsiCo (PEP) reported earnings of $1.06 per share in the third quarter, vs. 89 cents a year ago, as revenues rose 11%. Earnings were 99 cents per share when excluding a tax benefit.
European markets finished higher Thursday. In London, the FTSE 100 index gained 1.38% to 6,724.50. In Paris, the CAC 40 index rose 0.42% to 5,862.83. Germany's DAX index was 0.59% higher at 8,033.69.
Asian markets ended higher Thursday. Japan's Nikkei 225 index added 1.64% to 17,458.98. In Hong Kong, the Hang Seng index climbed 1.97% to 28,133.02.
Treasuries started Thursday lower, but late in the day investors seemed to be shifting money out of stocks and into bonds. The 10-year note rose 04/32 to 101-29/32 for a yield of 4.63%, and the 30-year bond finished unchanged at 101-01/32 for a yield of 4.87%.