[BRIEFING.COM] The market's see-saw action -- up one day and down the next -- continued Thursday as investors used sluggish retail sales, higher energy prices and rising bond yields as the latest excuses to consolidate recent gains. Yesterday, a technology-induced rally helped the Nasdaq record its second largest gain of the year so far (+1.5%) and close at a six-week high, which followed an unfounded Google-inspired sell-off a day before that.
Before the market opened, investors sifted through a plethora of same-store sales results from more than 75 retailers. However, the reappearance of cold weather in February, which is typically a decent barometer for spring merchandise, checked in with the smallest gain in nine months and weighed heavily on Consumer Discretionary -- the day's worst performing sector. Among the notable retailers missing forecasts were specialty apparel names like Talbots (TLB 25.93 -0.40) and Chico's FAS (CHS 41.35 -6.41) as well as teen retailers like ANF, ARO, PSUN and HOTT. The three largest retailers, discounters Wal-Mart (WMT 45.06 -0.09), Target (TGT 53.71 -0.86) and Costco (COST 52.80 +0.61), beat expectations, as did Gymboree (GYMB 24.70 +1.84), a suggested holding in our Active Portfolio, and several dept stores (e.g. FD, KSS, JCP and JWN). Nonetheless, tempered sales growth following January's surprisingly strong gains, coupled with rising prices across the energy complex, weighed heavily on retail stocks as well as overall sentiment.
An increase in the cost of borrowing also sparked some nervousness, especially in the rate-sensitive Financial sector. A late-day turnaround in brokerage helped pare sector losses but weakness in several leading bank stocks (e.g. C, BAC, WFC) took a toll on the S&P's most influential sector. The yield on the 10-yr note (-12/32) hit 4.63% following reports that the ECB, albeit widely anticipated, raised their key lending rate to 2.50%. Bond traders speculated that the ECB will raise rates to 3% by year-end, which diminished the desire to own dollar-denominated Treasuries. Doing little to sideline ongoing concerns of further Fed tightening was another jobless claims read which checked in below 300K level for a 7th straight week, reflective of a strong labor market.
Technology turned positive briefly intraday and helped lift the Nasdaq into the green for a moment, but weakness in hardware and software overshadowed semiconductor's late-day recovery efforts. Energy, however, finished the day on a strong note and acted as the market's biggest source of buying support as oil prices (+2.3%) rose for a third straight day and closed above $63 per barrel. NYSE Adv/Dec 1447/1794...Nasdaq Adv/Dec 1304/1701
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