Stocks mixed as drop in retail sales cools optimism from strong earnings reports

Stocks mixed after disappointing retail sales data

NEW YORK — Stocks traded in a tight range Wednesday after a disappointing retail sales report chilled optimism from Intel’s strong earnings and outlook.

The Dow Jones industrial average rose 15 points, putting the index inline to extend its six-day winning streak. The tech-heavy Nasdaq composite rose thanks to chipmaker Intel Corp.’s results.

In economic news, shoppers cut back on spending for the second straight month. The Commerce Department said June retail sales fell 0.5 percent. That’s worse than the 0.2 percent decline forecast by economists polled by Thomson Reuters. However, excluding autos, sales were down 0.1 percent, in line with expectations.

Shares of retails, including J.C. Penney Co., Macy’s Inc. and Target Corp., all fell after the monthly sales report.

Benny Lorenzo, chairman and CEO of Kaufman Bros. in New York, said that the retail sales provides another example for investors who are concerned that the economy might slow down in the second half now that most of the government’s stimulus programs have ended.

“Even if you put in strong early second quarter earnings, you still have a lot of skepticism out there,” Lorenzo said.

Retail sales are critical to the economic recovery because shoppers account for a large amount of U.S. economic activity. High unemployment has kept customers out of stores and could hold retailers’ earnings in check.

The weak sales report added to the mixed signals on the pace of a recovery. Economic reports have largely showed a rebound is slowing, but recent earnings have largely topped expectations. Companies have also been optimistic in their outlooks for growth during the second half of the year.

“We have a lot of conflicting news here,” said Bob Enck, president and CEO of Equinox Fund Management in Denver. Until economic and earnings reports more closely align, the market is likely to remain choppy and volatile, Enck said.

Intel reported its biggest quarterly profit in a decade as large corporations started buying new computers for employees. Companies have been reluctant to upgrade technology during the downturn, so a return of spending could be a sign corporations are ready to start expanding their businesses again and hire new workers.

Intel’s profit and outlook, which surpassed analysts’ forecasts, are considered good signs for the economy because the chipmaker manufactures 80 percent of the processors that run PCs and has a large global reach.

In late morning trading, the Dow rose 15.13, or 0.2 percent, to 10,378.15. The Standard & Poor’s 500 index fell 2.27, or 0.2 percent, to 1,093.07, while the Nasdaq rose 4.67, or 0.2 percent, to 2,246.70.

Intel shares rose 75 cents, or 3.6 percent, to $21.76. J.C. Penney fell 37 cents to $22.82, while Macy’s dropped 30 cents to $18.17. Target fell 46 cents to $49.43.

About two stocks fell for every one that rose on the New York Stock Exchange. Volume came to 241.5 million shares, compared with 248.4 million shares traded at the same time Tuesday.

Trading was tentative ahead of the release later Wednesday of the minutes from the Federal Reserve’s June meeting. Investors look at those comments closely for insight into how fast the Fed thinks the economy will grow in the second half of the year.

A drop in the Dow on Wednesday would snap a six-session winning streak that has pushed the index up 7 percent, its best stretch since last July. The recent run-up has erased nearly all the Dow’s losses for the year.

The Dow rose 147 points Tuesday after aluminum producer Alcoa and railroad company CSX both reported better-than-expected profit. The pair also provided optimistic outlooks for the rest of the year.

Stocks were in a slump in May and June as economic reports showed the recovery wasn’t proceeding as fast as hoped. Rising debt problems in some European countries also added to the markets’ turbulence.

However, early earnings reports have shown that slow economic growth is not hurting corporate profits. Investors’ concerns about a further slowdown later in the year have not been shared by companies, which have largely provided upbeat outlooks for future quarters.

“The forecasting has been great,” said Russell Croft, portfolio manager at Croft Leominster Investment Management in Baltimore. It has been outlooks, more than the most recent quarter’s results, that have pushed stocks higher in recent days, Croft added.

Bond prices rose slightly, pushing interest rates lower in the Treasury market. The yield on the benchmark 10-year Treasury note fell to 3.09 percent from 3.13 percent late Tuesday. That yield helps set interest rates on mortgages and other consumer loans.

The Russell 2000 index of smaller companies fell 3.51, or 0.6 percent, to 639.31.

Overseas, Britain’s FTSE 100 fell 0.9 percent, Germany’s DAX index dropped 0.1 percent, and France’s CAC-40 fell 0.4 percent. Japan’s Nikkei stock average jumped 2.7 percent.