While you were sleeping: U.S. retail sales disappoint

While you were sleeping: U.S. retail sales disappoint

(BusinessDesk) February 16 - Stocks on Wall Street slid as U.S. retail sales fell short of expectations and oil pulled back from recent highs, reflecting strength in the greenback.

The largest decliner in the S&P 500 Index was JDS Uniphase Corp, which dropped more than 7% after Sanford C Bernstein & Co cut its rating on the stock to "market-perform" from "outperform."

In early afternoon trading, the Dow Jones Industrial Average fell 0.35%, the S&P 500 Index shed 0.30% and the Nasdaq Composite Index declined 0.28%.

Sales at U.S. retailers in January rose less than forecast in a month when Americans dealt with the worst snowfall in decades.

Total retail sales rose 0.3%, the Commerce Department said. That fell short of the 0.6% increase economists polled by Reuters had expected. Compared with January last year sales were up 7.8%.

“I’m not surprised to see a pullback after the strong rally that we’ve had,” Tom Wirth, senior investment officer for Chemung Canal Trust Co, told Bloomberg News. “Retail sales came in weaker-than-expected, but they were affected by weather distortions. On the other hand, you had good manufacturing data which suggests that the economy is still on sound footing.”

Deutsche Boerse AG agreed to buy NYSE Euronext in a US$10 billion all-stock deal that creates the world’s largest owner of equities and derivatives markets. Deutsche Boerse will control 60%.

Reto Francioni, CEO of Deutsche Boerse, will serve as chairman, while Duncan Niederauer, CEO of NYSE Euronext, will keep that title in the new corporation which has yet to be named.

Bond investors are increasingly concerned about a pick-up in inflation, which erodes the value of fixed-income securities. Three months ago, interest rate futures factored in virtually no chance of a rate increase.

Now, traders have priced in a 93% chance that the Federal Reserve will lift interest rates in December, according to Reuters.

"The good news on inflation is behind us," Ken Volpert, head of the taxable bond group with the Vanguard Group in Valley Forge, Pennsylvania, told Reuters. Volpert, one of the biggest U.S. bond managers, oversees US$360 billion in assets.

The euro might also face a headwind despite gains today after data showing German investor confidence rose for a fourth month. In early New York trading, the euro was up 0.3% against the U.S. dollar at US$1.3522 after breaking its 100-day moving average at US$1.3541.

Camilla Sutton, chief currency strategist at Scotia Capital in Toronto, told Reuters that near-term technical indicators suggested the euro might weaken toward US$1.3425.

She isn’t alone. “Overall the euro is very vulnerable, and any rebound is likely to be unsustainable," Ian Stannard, currency strategist at BNP Paribas, told Reuter. "There are concerns about the banking system, and yield differentials [between the euro zone and the U.S.] are heading lower, so all the ingredients are there for the euro to come under more pressure."

Against the Japanese yen, the greenback was last up 0.6% to 83.79 yen.

"We expect that USDJPY will continue to drift higher in the near-term and accordingly are in favour of short-term, long-USDJPY positions.” Sutton said.

Oil fell. The decline in Brent crude outpaced that fall in U.S. crude, narrowing the gap between the two benchmarks that had widened to US$16.30 on Friday.

"It is just not sustainable to have such high differentials between the two products," Thorbjorn Bak Jensen, an oil market analyst at Global Risk Management, told Reuters. "Trades have just gotten too extended and now markets are beginning to normalize."

Brent crude dropped 93 cents to US$102.15 a barrel at 12.24pm EST, while U.S. crude fell 47 cents to US$84.34 a barrel.

(BusinessDesk)

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