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BusinessWeek.com
March 2, 2006
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Stocks Inch Lower on Retail Sales

Merchants like Gap, Pier One and Abercrombie & Fitch posted disappointing February sales. Crude futures climbed above $63

Stocks finished modestly lower Thursday, well off session woes, amid soft retail sales, weak foreign markets and a rally in crude futures. Energy groups gained, while cyclical, retail and rate-sensitive stocks like financial and utility companies were weak, says Standard & Poor's MarketScope.

The Dow Jones industrial average fell 28.02 points, or 0.25%, to 11,025.51. The broader Standard & Poor's 500 index slipped 2.08 points, or 0.16%, to 1,289.16. The tech-heavy Nasdaq composite index edged lower 3.53 points, or 0.15%, to 2,311.11.

Recent market choppiness may continue, some analysts say. "We do not yet see an end to the pattern of aborted rallies and reactions that have characterized market action over the past couple of months," says Richard Dickson, senior market strategist for Lowry's Reports.

Retail sales figures Thursday brought with them a winter chill. Apparel merchants Gap (GPS ), Chicos FAS (CHS , Abercrombie & Fitch (ANF ) and Aeropostale (ARO ) all posted February same-store sales that were weaker than Street estimates. Home furnisher Pier One (PIR ) fell 2.6% after a 10.8% sales decline.

Retail behemoth Wal-Mart (WMT ) said same-store sales rose 3.2%, as forecast, while a 3.6% gain at rival Target (TGT ) barely beat expectations. Costco (COST) posted flat second-quarter earnings of 62 cents a share, despite a solid 7% same-store sales rise. Costco shares rose 1.2%, while Wal-Mart slipped 0.2% and Target declined nearly 1.5%.

Internet search giant Google (GOOG) was in focus following an early-week plunge. Shares were 3.2% higher as the tech bellwether said its goal is to become a $100 billion company.

Chip stocks drew attention following a rally Wednesday that fizzled midway Thursday. Advanced Micro Devices (AMD ) was 3% higher, while Texas Instruments (TXN ) rose 0.5%. Intel (INTC ) fell 1.5%.

Auto-parts maker Dana (DCN) was down 44.9% as it said it could not make a bond payment of $21 million. Deutsche Bank said the stock might drop to zero due to possible bankruptcy.

On the economic front, investors were eyeing a tame employment report. Initial jobless claims jumped an unexpected 15,000 to 294,000 for the week ended Feb. 25, but remained lean for the month, says Action Economics.

The economic calendar Friday is highlighted by the ISM business activity index. February's reading is expected to bounce to 58.0 from January's 56.8, says Action Economics. Also Friday, the University of Michigan's consumer sentiment guage is seen at 88.0.

In the energy markets Thursday, April West Texas Intermediate crude oil futures settled higher $1.39 at $63.36 amid geopolitical concerns.

European markets finished lower. In London, the Financial Times-Stock Exchange 100 index dropped 11.1 points, or 0.19%, to 5,833. Germany's DAX index tumbled 83.12 points, or 1.42%, to 5,783.49. In Paris, the CAC 40 index slid 48.52 points, or 0.96%, to 5,009.09.

Asian markets finished mixed. Japan's Nikkei 225 index fell 54.7 points, or 0.34%, to 15,909.76. In Hong Kong, the Hang Seng index rose 64.36 points, or 0.41%, to 15,882.45. Korea's Kospi index slipped 3.89 points, or 0.28%, to 1,367.7.

Treasury Market

Prices for 10-year Treasury notes were lower in afternoon trading at 98-30/32 with a yield of 4.63%, while 30-year bonds fell to 98-04/32 for a yield of 4.61%. The yield curve was inverted.