April retail sales were better than expected, but a weak sales forecast from Wal-Mart and a fresh rise in oil prices weighed on the market
Stocks finished mixed Tuesday amid surging oil prices and a disappointing outlook from retail giant Wal-Mart Stores (WMT).
Shares of Hewlett-Packard (HPQ) dropped 5.5% in the wake of the company’s agreement to acquire Electronic Data Systems (EDS). Financial stocks were lower.
Meanwhile, economic reports on retail sales, import prices, and business inventories suggest the U.S. economy has more strength than expected but inflation continues to rise at disturbing rates. The dollar index was higher, while gold futures fell.
On Tuesday, the Dow Jones industrial average fell 44.13 points, or 0.34%, to 12,832.18. The broader S&P 500 index edged down 0.54 points, or 0.04%, to 1,403.04. The tech-heavy Nasdaq composite index gained 6.63 points, or 0.27%, to 2,495.12.
On the New York Stock Exchange, 17 stocks rose in price for every 14 that gained. The ratio on the Nasdaq was 15-14 positive. Trading was slow, which shows the market still lacks conviction about the immediate future, according to S&P MarketScope.
Wal-Mart shares dropped after the world's largest retailer posted a 6.9% rise in fiscal first-quarter net income to 76 cents per share, vs. 68 cents a year earlier. Revenue rose 10%. Low prices and operational changes helped offset higher energy costs and food inflation. But the company gave a cautious outlook for the current quarter, saying earnings may miss analysts' expectations and that there will be little, if any, U.S. same-store-sales growth.
Hewlett-Packard agreed to acquire EDS for $25 per share, or an enterprise value of about $13.9 billion. Hewlett-Packard expects the deal to boost fiscal 2009 non-GAAP EPS and fiscal 2010 GAAP EPS.
Separately, Hewlett-Packard sees preliminary non-GAAP EPS at 87 cents in the second quarter (to be released May 20), ahead of the 84-cent consensus view. The company raised its fiscal 2008 revenue guidance to $114.2 billion to $114.4 billion from $113.5 billion to $114 billion, and increased its non-GAAP EPS view to $3.54-$3.58 from $3.50-$3.54.
On the economic data front, April retail sales fell 0.2%, vs. a median estimate of a 0.1% decline, but the ex-auto aggregate jumped 0.5%, more than the 0.3% hike that was expected. The March ex-auto component was revised to a 0.4% gain from 0.1%. Vehicles & Parts dropped a hefty 2.8%, which is consistent with the 5% drop in unit vehicle sales. The housing-related components revealed a notable bounce from recent weakness, with building materials climbing 2.0%, furniture inching up 0.1%, and electronics up 1.4%.
U.S. import prices surged 1.8% in April, more than the 1.5% rise that was anticipated, while export prices rose 0.3%, less than the median forecast of a 0.5% increase.
Business Inventories rose a better-than-expected 0.1% in March, vs. the expected 0.5% increase, after a 0.5% hike in February.
Investors on Tuesday took note of comments by Cleveland Federal Reserve President Sandra Pianalto that inflation is a problem, and remarks by Fed Chairman Ben Bernanke that underscored the U.S. central bank's determination to continue extraordinary liquidity measures to ease strains for financial institutions.
In the energy market Tuesday, June WTI crude oil futures hit a record $126.98 shortly before noon, before ending the trading session up $1.57 to $125.80 per barrel. "There is a strong uptrend in this market and prices won't come down until that trend is broken," a BNP Paribas trader told S&P MarketScope. "Crude fell to $110 last week and traders bought on that dip."
Among other stocks in the news Tuesday, Fluor Corp. (FLR) shares jumped after the company reported first-quarter earnings of $1.50 per share vs. 94 cents a year ago on a 32% revenue rise. The consensus EPS view was $1.27 per share. Fluor raised its 2008 EPS guidance to $6.25-$6.55 per share. S&P reiterated its buy rating on the shares and Lazard Capital reportedly upgraded the stock to buy from hold.
Staples Inc. (SPLS) raised its hostile bid for rival Corporate Express to $2.27 billion. Corporate Express said it's willing to talk to Staples about a deal.
LDK Solar Co. (LDK) shares fell after the company posted a first-quarter profit of 45 cents per share vs. 44 cents in the fourth quarter on a 21% sequential revenue rise. LDK said its gross profit margin was 27.7%, compared with 30.1% in the fourth quarter. It sees second-quarter revenue of $278 million to $288 million with wafer shipments between 136 MW to 146 MW. The company also now sees 2008 revenue of $1.08 billion to $1.18 billion and wafer shipments of 560 MW to 580 MW, with gross margin expected to be 23%-28%, weaker than earlier expectations.
Major European indexes finished mixed Tuesday. In London, the FTSE 100 index was down 0.14% to 6,211.90. In Paris, the CAC 40 index rose 0.45% to 4,998.67, and Germany's DAX index gained 0.34% to close at 7,060.19.
In Asia, Japan's Nikkei 225 advanced 1.53% to close at 13,953.73, and Hong Kong's Hang Seng index was up 1.95% at 25,552.77.
Treasuries were lower on Tuesday, reacting to better than expected non-headline retail sales figures and some strong earnings news. The ten-year note sank 27/32 to 99-26/32 for a yield of 3.90%, while the 30-year bond fell 39/32 to 96-06/32 for a yield of 4.61%.