Stocks Fall on Weak Retail Sales

Goldman Sachs fell, while J&J moved up on earnings news. The headline PPI index dropped

Stocks finished lower Tuesday after a report showed March retail sales fell 1.1%, more than expected, and dropped 0.9% excluding autos, dashing hopes for an economic turnaround. News of a $5 billion equity offering at Goldman Sachs Group (GS) led to selling among financials.

There was little reaction to the report showing March producer price index (PPI) headline rate fell 1.2% and core rate was unchanged, but deflation fears might surface.

On Tuesday, the 30-stock Dow Jones industrial average fell 137.63 points, or 1.71%, to 7,920.18. The broad S&P 500 index fell 17.23 points, or 2.01%, to 841.50. The tech-heavy Nasdaq composite index lost 27.59 points, or 1.67%, to 1,625.72.

Treasuries moved higher on the economic news. The dollar index rose. Gold futures were down, while crude oil futures also turned lower to $49.35 a barrel.

In speeches today, Bernanke offered some hope that the 16-month-old recession may be losing some of its severity and he is "fundamentally optimistic" about the economy's longer term prospects. He specifically cited recent figures on housing, consumer spending and new vehicle sales as some of those signs that the recession is slowing. And Obama proclaimed signs of economic progress but also warned Americans eager for good news that "by no means are we out of the woods."

Goldman Sachs (GS) shares lost ground after the company announced it priced a public offering of nearly 40 million shares at $123 per share, below yesterday's close. The company says after completion of the stress assessment, if permitted by its supervisors and if supported by the results of the stress assessment, GS would like to use the capital raised plus additional resources to redeem all of the TARP capital. The investment bank posted $3.39, vs. $3.23 a year ago, first quarter EPS on 13% revenue rise.

Dendreon (DNDN) shares surged 10.36 to 17.66 after the company announced that the pivotal Phase 3 IMPACT study of Provenge in men with advanced prostate cancer met its primary endpoint of improving overall survival compared to a placebo control. Merriman Curhan upgraded the stock to neutral from sell.

Johnson & Johnson (JNJ) shares were up after the company reported $1.26, vs. $1.26 first quarter EPS on 7.2% sales drop. Street was looking for $1.22. Reaffirms $4.45-$4.55 '09 EPS guidance, excluding impact of special items.

MetLife (MET) says it has elected not to participate in U.S. Dept. of the Treasury's Capital Purchase Program. Also confirms that, as a federally chartered bank holding company with more than $100 billion in total assets, it is one of the top 19 U.S. banking organizations participating in the Treasury's capital planning exercise being conducted under the department's Capital Assistance Program.

In economic news, the U.S. retail sales for March declined 1.1% overall and 0.9% ex-autos. There were upward revisions that left headline gains of 0.3% (was -0.1%) for February and 1.9% (was 1.8%) in January, and ex-auto gains of 1.0% (was 0.7%) for February and an unrevised 1.6% in January. "The March sales drops reversed about half of the surprising January gains, and hence shaved some of the good first quarter news for the consumer," says Action Economics.

The U.S. PPI report, with its big 1.2% March headline drop but flat core figure (which excludes food and energy), revealed a sharp year-over-year headline drop of 3.5% that followed prior declines of 1.3% in February and 1.0% in January. But the core year-over-year figure remained at a stubbornly firm 3.8% in March, says Action Economics.

Business inventories fell 1.2%, more than expected.

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