Stocks flip-flop after jobs, retail data

ByABC News
August 13, 2009, 3:33 PM

NEW YORK -- Investors kept their focus on an economic recovery Thursday, shaking off disappointing news and buying stocks in some riskier industries.

Wall Street's major indexes wavered but held on to their gains from the big rally that followed the Federal Reserve's upbeat comments one day earlier. Financial, technology and energy companies were among the big winners, while stocks in defensive, or relatively safer, industries like health care and utilities fell. Retailers declined after a worse-than-expected report on retail sales.

Meanwhile, Treasury prices rose after the government had a successful auction of 30-year bonds. The Treasury Department issued a total of $75 billion of debt this week as part of its ongoing efforts to fund the government's stimulus programs, and investors were relieved that the market was able to absorb such a huge supply.

Wall Street's showing Thursday was a sign of the market's strength in the day's economic reports that suggested the economic recovery could be slowed by a weak consumer. Investors seemed to look past the latest news and focus on the Fed's more upbeat assessment of the economy. Stocks soared Wednesday after the Fed reassured investors that the economy was "leveling out," not just easing its decline.

"I think investors are prepared to give the economy some time to show a strong improvement," said Avery Shenfeld, chief economist at CIBC World Markets.

Among the day's reports, the Commerce Department said retail sales fell 0.1% in July, significantly worse than the 0.7% increase economists expected. Retail sales are considered a strong indicator of economic recovery because consumer spending accounts for more than two-thirds of all economic activity.

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.