The stock market is trying to reconcile some disappointing retail sales and jobs data with the Federal Reserve's more upbeat view of the economy.
The major indexes wavered in early trading Thursday before moving modestly higher, tentatively extending the big rally that followed the Fed's comments on Wednesday.
Falling retail sales chilled hopes the
recession will end sooner rather than later. The Commerce Department said sales fell 0.1 percent in July, significantly worse than the 0.7 percent increase that was expected by economists polled by Thomson Reuters.
Results would have been even worse had it not been for a boost in auto sales thanks to the Cash for Clunkers autos trade-in program. Excluding autos, retail sales fell 0.6 percent, compared with expectations for a gain of 0.1 percent.
Retail sales are considered a strong indicator of economic recovery because consumer spending accounts for more than two-thirds of all economic activity.
"The data suggests the consumer sector is going to be hard to drag into the recovery," said Avery Shenfeld, chief economist at
CIBC World Markets. "It is common wisdom that that is the case, but this is a reminder to the markets that the average American is still burdened by too much debt and too weak job prospects."
A weekly report on unemployment also came in worse than projected. The Labor Department said the number of newly laid-off workers filing claims for unemployment benefits rose unexpectedly to a seasonally adjusted 558,000, from 554,000 the previous week. Analysts were expecting new claims to drop to 545,000.
In midmorning trading, the Dow Jones industrial average rose 13.00, or 0.1 percent, to 9,374.61 after rising 120 Wednesday in response to the Fed's statement that the economy is "leveling out."
The Standard & Poor's 500 index rose 3.40, or 0.3 percent, to 1,009.21, while the Nasdaq composite index rose 7.32, or 0.4 percent, to 2,006.04.
About seven stocks rose for every six that fell on the
New York Stock Exchange, where volume came to a very light 123.9 million shares.
In other trading, the Russell 2000 index of smaller companies slipped 0.01, or virtually unchanged, to 572.16.
Gains in overseas markets and a better-than-expected earnings report from Wal-Mart Stores Inc. helped offset the day's disappointing news.
Asian markets rose after the Fed's statement, while European markets were boosted by new data showing recessions have ended in Germany and France.
Meanwhile, Wal-Mart reported virtually flat second-quarter income compared with a year ago, but results exceeded Wall Street expectations. The world's largest retailer also raised the low end of its profit guidance, saying it expects shoppers to continue to be attracted by its low-priced items. Still, company officials warned that the economy will continue to remain difficult in the coming months.
In other economic data, a report showed businesses reduced inventories for a 10th straight month in June, although total business sales posted the first increase in nearly a year.
An upgrade of Texas Instruments Inc.'s stock by
Baird & Co. helped lift technology stocks. Financials also moved mostly higher for a second straight day.
Bond prices rose ahead of an auction of 30-year bonds. The yield on the benchmark 10-year Treasury note, which moves opposite its price, fell to 3.66 percent from 3.72 percent late Wednesday.
