Stocks head for lower open on retail sales report

August 13, 2008 6:25:54 AM PDT
U.S. stock futures pointed to a lower open Wednesday after the government reported that retail sales fell in July to their weakest levels in five months and as oil prices advanced. The reading was weaker than Wall Street had expected and comes as investors are anxious about the retail sector and the health of the consumer, whose spending is the key driver of the economy.

The Commerce Department reported that retail sales slipped 0.1 percent last month as rising prices and other forces offset the effect of billions of dollars of economic stimulus payments to U.S. households. Excluding a big drop in sales of automobiles, retail sales rose 0.4 percent. But even on that basis, it was the weakest showing since February.

Wall Street had expected sales to remain flat in July after a minor increase in June. The report followed a warning from department store bellwether Macy's Inc. that its full-year profits would fall short of expectations because of slower sales.

The figures come a day after stocks fell on worrisome news from JPMorgan Chase & Co. and other financial companies about the lingering effects of the credit crisis on the economy. The Dow Jones industrials fell nearly 140 points.

The skittishness seen Tuesday could continue as Wall Street grapples with worries that consumers are turning more cautious, with gas prices still high despite a sharp drop in oil prices in the last month.

An uptick in oil also tinged investor sentiment ahead of Wednesday's session. Light, sweet crude rose 69 cents to $113.70 a barrel in premarket electronic trading on the New York Mercantile Exchange.

Stock futures had shown only modest moves ahead of the retail report but weakened as it arrived. Dow futures fell 69, or 0.59 percent, to 11,576. Standard & Poor's 500 index futures declined 7.00, or 0.54 percent, to 1,284.50, and Nasdaq 100 index futures fell 1.75, or 0.09 percent, to 1,943.00.

Bond prices rose. The yield on the benchmark 10-year Treasury note, which moves opposite its price, slipped to 3.88 percent from 3.90 percent late Tuesday. The dollar was mixed against other major currencies, while gold prices rose.

Deere & Co. disappointed investors early Wednesday after reporting weaker-than-expected profit. The maker of farm equipment said its third-quarter earnings rose 7 percent as growth in the global agricultural market aided results. The company earned $575.2 million, or $1.32 a share, compared with $537.2 million, or $1.18 a share, a year earlier.

Analysts surveyed by Thomson Reuters, on average, predicted earnings of $1.36 per share.

Overseas, Japan's Nikkei stock average fell 2.11 percent. In afternoon trading, Britain's FTSE 100 fell 1.06 percent, Germany's DAX index lost 1.73 percent, and France's CAC-40 fell 1.81 percent.