Stocks finished lower Tuesday in a volatile session after a sales warning from Target (TGT ) raised worries about holiday sales. The latest batch of economic data pointed to firm growth and tame inflation.
The Dow Jones industrial average fell 10.73 points, or 0.1%, to 10,686.44. The broader Standard & Poor's 500 index was down 4.75 points, or 0.39%, to 1,229.01. The tech-heavy Nasdaq composite index lost 14.21 points, or 0.65%, to 2,186.74.
December crude oil futures fell 71 cents at $56.98 a barrel. With little else to go on on Tuesday, sources said the market geared up for Wednesday's weekly EIA inventory data, which are expected to show a nearly 2.0 million barrel rise in crude stocks, a 500,000 barrel rise in distillate inventories, and a 1.5 million barrel build in gasoline supplies, says Action Economics.
Also coming Wednesday is the release of the October overall-consumer price index (CPI), which is expected to be unchanged, while the core index increases 0.2%. Energy prices are expected to post a reversal following the strength over the last three months. The focus will be on the core index, given heightened market concerns with inflation pressures, says Action Economics.
In economic news Tuesday, the producer price index (PPI), a measure of wholesale inflation, rose 0.7% in October, while the core fell 0.3%, following gains of 1.9% and 0.3% in September, respectively. On a year-over-year basis, overall producer prices slipped to a 5.9% growth rate from 6.9% previously, while the core dove to 1.9% from 2.6%. The core data were better than economists expected.
Retail sales fell 0.1%, but rose 0.9% excluding vehicles in October, following gains of 0.3% and 1.4%, respectively in September. Vehicles and parts component fell 3.6%, after a 3.6% drop in September. Gas station sales were off 0.8%. But, department store sales and non-store retailers were up 1.5% and 1.2% respectively. The data were stronger than expected.
The Empire State index, a gauge of manufacturing activity in the Mid-Atlantic states, rose to 22.8 from 12.1 in November. The employment component rose to 16.9 (a 2005 high) from October's 9.3, while prices paid were 60.6, up from the previous 57.3.
Among companies in the news, Target (TGT ) says it expects November same-store sales growth to fall short of expectations. ST Robinson Humphrey reportedly downgraded the stock to neutral from buy. The stock fell and dragged general merchandise and other retailers with it.
But there was good news from Home Depot (HD ). The home improvement retailer posted third-quarter earnings per share of 72 cents, vs. 60 cents a year ago, on 3.6% same-store sales rise and 11% total sales rise. It sees 10%-12% fiscal year 2006 sales growth, vs. previous estimate of 9%-12%. It raised 14%-17% EPS growth guidance to 17%-18%.
In deal news, Guidant (GDT ) and Johnson & Johnson (JNJ ) revised their deal by which J&J will acquire Guidant in a $19 billion deal, vs. the previous $21.5 billion value. Terms: $33.25 cash, 0.493 J&J share for each Guidant share, valuing Guidant at $63.08 based on last night's close.
Allergan (AGN ) bids to acquire Inamed (IMDC ) in a $3.2 billion deal, a premium of about $450 million over the current value of Medicis' offer. Terms: $84.00 cash or 0.8498 Allergan share, at election of holder.
Amazon.com (AMZN ) will be added to S&P 500 index after the close of trading on Nov. 18, replacing AT&T (T ), which is being acquired by SBC Communications (SBC ).
Treasury yields fell after a mixed bag of stronger than expected headline PPI, retail sales-ex autos and Empire State data, though a tame core PPI restrained bearish pressures. The bond market enjoyed some relief gains following testimony from Fed Chairman nominee Bernanke, which leaned toward continuity on inflation fighting, more openness and perhaps even an inflation target at some stage, says Action Economics. The 10-year note yield edged down to 4.55%.
European stock markets finished mixed on Monday. London's Financial Times-Stock Exchange 100 index was down 30.4 points, or 0.56%, at 5,439.6.
Germany's DAX index rose 18.18 points, or 0.36%, to 5,110.61 after German November ZEW consumer confidence index fell to 38.7 from 39.4 in October, weaker than the 47 reading expected. But Eurozone third-quarter GDP of 0.6% was in line with forecasts.
In Paris, the CAC 40 index lost 5.3 points, or 0.12%, to 4,543.15.
In Japan, the Nikkei 225 index fell 24.27 points, or 0.17%, to 14,091.77 on profit taking, with banking issues coming under continued pressure.
In Hong Kong, the Hang Seng index closed flat at 14,627.41. Rate-sensitive property and bank shares were weak, while gains in large-cap bellwethers China Mobile and Hutchison Whampoa supported the index, says Standard & Poor's MarketScope.