Dow set to snap 3-week losing streak even as stocks dip Friday on drop in retail sales

Dow set for first weekly gain in nearly a month

NEW YORK — The Dow Jones industrial average is headed for its first winning week in a month. Stocks were mixed Friday following an early slump on poor retail sales figures but didn’t fall enough to offset Thursday’s big rally.

The Dow pared sharp morning losses after a report showed consumers are gaining confidence in the economy, even if they aren’t returning to stores.

Treasury prices climbed and pushed down interest rates after spiking Thursday.

The Reuters/University of Michigan consumer sentiment index showed consumer confidence grew to its highest level since January 2008 and came in well ahead of forecasts.

The jump in confidence was an encouraging sign, but still doesn’t signal the all-clear for the economy, said Michael Sheldon, chief market strategist at RDM Financial Group in Westport, Conn.

“We recovered some lost ground, but there is still some ways to go,” Sheldon said. That was evident in the disappointing retail sales report, which initially sent stocks sharply lower at the open.

Retail sales fell 1.2 percent in May, the Commerce Department reported. It was the first drop in eight months and came in well short of forecasts. Economists predicted the pace of growth would slow between April and May, but still rise 0.4 percent.

Companies that sell consumer staples like Proctor & Gamble Co., which makes Tide detergent and Gillette razors, dropped after the disappointing sales report. Retailers like J.C.Penney Co. and Macy’s Inc. also dipped on the news.

The mixed reports come a day after stocks surged on upbeat global economic data. The back-and-forth movements fit into the trend of extreme volatility that has been seen in recent weeks. The Dow has had only one two-day winning streak since late April, and that included a day where it rose just 6 points.

The Dow fell 37 points in late afternoon trading Friday after falling nearly 90 points shortly after the open. It had climbed 279 points Thursday following reports that showed the global economy is healing, despite persistent worries over Europe’s sovereign debt crisis.

“The market is nervous,” said Joe Heider, principal at Rehmann Financial in Cleveland. “It’s reacting on a day-to-day basis.”

Heider said the economy is not growing fast enough to overcome the concerns about Europe’s debt crisis and other issues such as the oil spill in the Gulf of Mexico. That has led to wild fluctuations in the market, sometimes even within trading days as was seen earlier this week, when big moves came right at the end of trading.

The retail sales report marks the second straight Friday that stocks hesitated after weak domestic economic news. Investors were looking for the sales data to provide reassurances about the nation’s health a week after a disappointing employment report.

In the final hour of trading, the Dow fell 37.18, or 0.4 percent, to 10,135.35. Despite Friday’s dip, the Dow is on pace to snap a three-week losing streak.

The Standard & Poor’s 500 index fell 3.65, or 0.3 percent, to 1,083.19, while the technology-heavy Nasdaq composite index rose 5.57, or 0.3 percent, to 2,224.28.

The tech industry got a boost after handset maker Motorola Inc. settled a patent complaint with Research In Motion Ltd.

About the same amount of stocks rose and fell on the New York Stock Exchange, where volume came to 678 million shares, compared with 867 million shares traded at the same time Thursday.

Treasury prices rose as some investors sought safety following the retail sales report. The yield on the benchmark 10-year Treasury note, which moves opposite its price, fell to 3.23 percent from 3.33 percent late Thursday.

Friday’s reports follow a trend over the past month showing an uneven recovery, which has added concern to a market already struggling with worries about the health of Europe’s economy. The Dow has mostly fallen since late April as investors worry about whether debt problems and steep government spending cuts in countries like Greece, Spain, Portugal and Hungary will slow down Europe’s economy so much that the economic slump would spread around the globe.

The euro’s level against other currencies has become a key indicator of confidence in European governments’ ability to resolve their fiscal problems. The currency, which is used by 16 countries, fell to $1.2079.

Analysts say everyday investors, in particular, are still nervous about the market and economy, and are sitting on the sidelines. That leaves institutional investors as the main players in the stock market, which explains why volatility has been so high.

Institutional traders’ “sense of long-term holding is in minutes,” said Bob Tull, chief operating officer of Old Mutual Global Index Trackers. The quick trades and constant movement of professional money managers means stocks are bound to gyrate more than if there is a steady flow of cash from retail investors heading into the market.

Proctor & Gamble fell $1.32 to $60.59. J.C.Penney dropped 57 cents to $25.70, while Macy’s fell 31 cents to $20.97.

Motorola shares jumped 26 cents, or 3.8 percent, to $7.10. Research in Motion shares dipped 19 cents to $58.92.

The Russell 2000 index of smaller companies rose 1.46, or 0.2 percent, to 641.25.

Britain’s FTSE 100 rose 0.6 percent, Germany’s DAX index fell 0.1 percent, and France’s CAC-40 rose 1.1 percent. Japan’s Nikkei stock average rose 1.7 percent.