Stocks Finish Lower

Disappointing retail sales, weekly jobless claims data, and a weaker dollar raised concern about the strength of the economic recovery

Stocks ended lower Thursday, continuing the weak tone of the previous session, as some retailers reported soft monthly sales and investors worried about the strength of the economic recovery. Also weighing on investor sentiment was the sharp rise in gold prices and the continued swoon in the dollar, notes S&P MarketScope.

The Dow Jones industrial average fell 69.5 points, or 0.81%, to 8,491.22. The broader Standard & Poor's 500-stock index was down 9.35 points, or 1.01%, to 920.27. Meanwhile, the tech-heavy Nasdaq composite lost 17.07 points, or 1.13%, to 1,489.69.

One stock getting hit in Thursday's session was Whole Foods Market (WFMI ). The grocery store chain reported weaker-than-expected sales and said it expects comparable store-sales to remain at low end of 6.5% to 8.5% guidance range for the remainder of 2003.

Many retailers were lower after releasing sales for the month of April. Wal-Mart Stores (WMT ) reported a 4.6% gain in total U.S. sales. The company says that although sales were lower than planned, it expects first-quarter EPS to be at the high end of previously-announced 40 cents to 42 cents range.

Kohl's (KSS ) shares fell after it posted 4.1% lower April same-store sales. Due to its first-quarter same-store sales performance, the department store chain expects first-quarter EPS to be about 32 cents, below estimates.

Nordstrom (JWN ) posted slightly lower April same-store sales and 5.2% higher total sales. The department store operator now forecasts first-quarter EPS to fall in the 12 cents to 15 cents range due to below-plan sales and more markdowns than it expected.

On a brighter note, Gap (GPS ) said same-store sales jumped 20% in April, and raised its first-quarter earnings outlook to 19 to 22 cents per share.

Wireless services stocks were lower after Nextel Communications (NXTL ) was downgraded by Goldman Sachs to "underperform" from "in-line."

In the tech sector, Electronic Data Systems (EDS ) reported first-quarter results Wednesday evening of 23 cents loss per share (including charges), vs. EPS of 70 cents a year ago. Revenue rose 2% to $5.37 billion. Operating profit was 30 cents a share, at the low end of the company's projection and below the Street's forecast of 39 cents. EDS warned that second-quarter profit would fall below forecasts; it sees a profit before items of 33 cents to 38 cents a share on revenue of between $5.4 billion and $5.6 billion.

Biotech outfit Cephalon (CEPH ) shares fell after the company reported first-quarter operating EPS of 21 cents, vs. 1 cent a year ago, on a 30% revenue rise. The company expects to meet its previous 2003 guidance. Cephalon shares fell after Morgan Stanley downgraded the company. S&P also lowered its rating to accumulate from strong buy, given that first-quarter sales were below its forecast -- and that the company's second-quarter guidance of 30 cents in EPS and $155 million in sales is below S&P's estimate.

In economic news, jobless claims fell 28,000 to 425,000 for the week ended May 3, confirming the continued softness in the labor market. Though claims dropped more than expected, the string of claims have been over 400,000 for 12 straight weeks, the longest in over a decade, says economic research outfit MMS International. The prior week was revised higher to 453,000 from 448,000.

Treasury Market

Treasuries finished in the green Thursday, but off their highs, after wrapping up the last leg of the $58 billion quarterly refunding. The curve continued to flatten in deference to the Fed's concerns about deflation, says economic research outfit MMS International.

The release of minutes to the Mar. 18 Federal Open Market Committee (FOMC) meeting didn't add a lot to what was known with respect to the policy gathering, says MMS. Policymakers thought assigning a risk to a variety of plausible outcomes would be "misleading" in terms of the Committee's confidence and knowledge of conditions. An interesting part of the minutes, though, was the fact that the FOMC was concerned about disinflation over the coming quarters, saying it was a "distinct possibility," notes MMS.

With no major economic data coming out Friday, the inverse trade in stocks may set the tone for Treasuries.

World Markets

European markets fell after both the Bank of England and the European Central Bank left interest rates unchanged. London's FTSE 100 index was down 64 points, or 1.6%, to 3,928.9. The Bank of England noted an inflation report due out May 14 but issued no statement to explain its lack of action.

In France, the CAC 40 index dropped 84.79 points, or 2.8%, to 2,939.17. The government is bracing for a large-scale strike on May 13 to protest Chirac's pension reform plans, which the government said it needed to save the system.

In Germany, the DAX index declined 119.56 points, or 3.98%, to 2,886.08. Observers believe the ECB will cut rates at its next meeting, but were disappointed that it waited since German employment and factory orders reports in the past few days were weak.

Asian markets finished lower. In Japan, the Nikkei index lost 78.22 points, or 0.96%, to close at 8,031.55, as exporters were threatened by the yen's gains against the U.S. dollar. Hong Kong's market was closed for Buddha's birthday.

Before it's here, it's on the Bloomberg Terminal.