After-Christmas reports suggest holiday sales were weaker than expected, but strong at online retailers like Amazon
Stocks barely budged Wednesday after the pre-Christmas rally amid disappointing news on holiday sales and more signs the housing sector is facing a tough 2008.
Traders -- or at least those who showed up on the day after Christmas -- also were reacting to news that legendary investor Warren Buffett's Berkshire Hathaway (BRK.A) had taken a 60% stake in industrial conglomerate Marmon.
On Wednesday, the Dow Jones industrial average rose just 2.36 points, or 0.02%, to 13,551.69. The broader S&P 500 edged up 1.21 points, or 0.08%, to 1,497.66. The tech-heavy Nasdaq composite index moved 10.91 points, or 0.4%, higher to 2,724.41.
Trading was slow in the stock market's fourth consecutive positive session. For every stock higher Wednesday on the New York Stock Exchange, another was falling in price. The ratio was 16 to 13 positive on the Nasdaq.
Among the news from retailers, the nation's second largest retailer, Target (TGT) said same-store sales in December would range from a positive 1% to a negative 1%, falling short of forecasts. The International Council of Shopping Centers' index of retail chain store sales rose 2.8% last week, smaller than expected, and the U.S. Redbook chain store sales measure was up 1.2% for the week ended Dec. 22.
Mastercard (MA) estimated holiday spending was up 2.4% this year, compared to a 6.6% increase in 2006. A slowdown in women's apparel sales hurt, Mastercard said.
"All told, the holiday shopping season is shaping up to be a disappointment but not a disaster," wrote Ryan Sweet, an economist at Moody's Economy.com.
In other economic news, the U.S. S&P Case-Shiller index, a measure of single-family home prices in 20 cities, sank 1.4% in October, compared to a 0.8% drop in September, and 6.1% from a year ago. The 10-city measure fell 6.7% from a year ago, a record drop.
"No matter how you look at these data, it is obvious that the current state of the single-family housing market remains grim," said Robert J. Shiller, chief economist at MacroMarkets LLC, in a statement. Average prices in all 20 metropolitan areas fell from September to October, and only three cities -- Charlotte, Portland and Seattle -- still show positive growth from a year ago.
Action Economics says the October data "shouldn't come as a huge surprise" but "suggests that the housing sector remains vulnerable heading toward 2008."
On Wednesday, oil prices headed higher on news that the Turkish military has again attacked Kurdish rebels in northern Iraq. February NYMEX crude oil was up $1.78 to $95.91 per barrel. Another factor pushing up prices: Analysts expect U.S. crude oil supply to fall in a report expected Thursday. Airline stocks were hurt by oil's rise, with the industry ending the day down 1.67% according to Standard & Poor's.
Among stocks in the news Wednesday, Berkshire Hathaway agreed to buy a $4.5 billion stake in Marmon Holdings, a privately held industrial firm owned by the Pritzker family. Berkshire will initially own 60% of Marmon, but increase its stake to 100% over the next five to six years.
Target had strong sales and traffic in the third week of December, but it wasn't enough to make up for a weak first half of the month. Expect more discounts in the post-holiday period, which should hurt profit margins, Jefferies analyst Daniel Binder says. "While Target continues to do an excellent job in merchandising and operations, the macro environment could become more unfavorable as the housing and job markets slow further," he wrote.
Shares of general merchandise retailers were off 2.66% on Wednesday, according to S&P. Target shares dropped 2.5% and rival Wal-Mart (WMT) fell 0.74%, but the main impact of Target's news was to raise worries about other retailers. Macy's (M) shares, for example, lost 4% and Circuit City (CC) dropped 6.7%, as retailers made up seven of the ten worst performers in the S&P 500 on Wednesday.
Online retailers, however, were doing better. Amazon.com (AMZN) said it had its "best ever" holiday season, though it provided few financial details. Its shares were up 2%.
MBIA (MBI), the troubled bond insurer, jumped 11% after Davis Selected Advisers reportedly took a 5.1% stake in the company.
Two days before, Davis, along with Singapore's investment company Temasek Holdings, made a deal to invest $6.2 billion in another financial firm hurt by the credit crisis, Wall Street giant Merrill Lynch (MER). On Wednesday, Sandler O'Neill analyst Jeff Harte said the extra capital for Merrill came at a "steep price," cutting earnings for existing shareholders by an estimated 13% per share in 2008. But the deals were a "necessary evil" given Merrill's financial situation. The firm faces an estimated $10 billion in subprime and other credit losses in the fourth quarter, Harte wrote.
General Motors (GM) was essentially flat Wednesday even though there was news that the company will be surpassed by Toyota Motor as the world's largest automaker. Toyota said it expects to sell 9.36 million vehicles for 2007, above GM's forecast for 9.259 million vehicles world-wide this year.
Apple (AAPL) shares pushed above the $200 mark for the first time Wednesday before pulling back to end the day up 0.08% to $198.95.
Google (GOOG) ticked 1.4% higher even as a federal appeals court dealt the company a setback in a patent infringement case.
Wyeth Pharmaceuticals (WYE) says it will sue Teva Pharmaceuticals (TEVA) for patent infringement based on Teva's launch of a generic acid reflux drug to compete with Wyeth's Protonix.
Lexington Realty Trust (LXP) declared a special cash dividend of $2.10 per share, payable on Jan. 15.
Ampal-American Israel (AMPL) says it will acquire a 35% stae in a sugarcane ethanol production project in Columbia.
European and most other world markets were closed Wednesday. In Japan, the Nikkei 225 was up 0.65% to 15,653.54.
Bond prices fell Wednesday. The two-year Treasury note dropped 04/32 to 99-21/32 for a yield of 3.319%, while the ten-year note fell 18/32 to 99-25/32 for a yield of 4.28%.