Stocks dawdle; gold soars over $1,270

Updated at 11 p.m. ET

 

Stocks ended mostly flat after a daylong  struggle even as August U.S. retail sales and quarterly results from electronic retailer Best Buy (BBY) were better than expected.

Gold jumped to a record close on Goldman Sachs speculation that the Federal Reserve will buy as much as $1 trillion in bonds to boost the economy. The dollar fell; silver and agricultural prices moved up. Early Wednesday, Japan intervened in currency markets for the first time in six years to push the dollar higher against the yen. Japan's Nikkei-225 Index ($JP:N225) jumped more than 2%. U.S. stock futures were slightly higher.

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The Dow Jones industrials ($INDU) finished down 18 points to 10,526. The Standard & Poor's 500 Index ($INX) was off 1 point to 1,121. But the Nasdaq Composite Index ($COMPX) finished with a 4-point gain to 2,290. The declines for the Dow and S&P 500 were their first after four straight gains.

The Nasdaq held on to its gains as investors bet on more dividends and share buybacks. Cisco Systems (CSCO) said it plans to pay its first dividend starting in 2011. Cisco finished up 0.9% to $21.45.

Among stocks seeing sizable moves today:

• J.C. Penney (JCP) was the S&P 500 leader, up 7.4% to $23.99. CEO Mike Ullman told a Goldman Sachs conference that sales for its back-to-school selling season exceeded internal projections.
• Cliffs Natural Resources (CLF), the largest North American iron-ore producer and a big player in coal, was down 6.5% to $63.18. The decline, the largest for an S&P 500 stock, came after the company said it expects total 2010 coal sales of 3.9 million tons. Revenue per ton will be $115 to $120, down from an earlier forecast of $140 to $145.
• Cracker Barrel Old Country Store (CBRL) jumped 2.8% to $49.94. The operator of 595 restaurants in 41 states forecast a 3% to 4% increase in revenue in fiscal 2011.
• Delta Air Lines (DAL) rose 5% to $11.18. The gain, tops among stocks in the Dow Jones Transportation Average ($DJT), came after Delta said passenger revenue per available seat mile will rise 15% in the third quarter; system capacity will rise 2%.
• Volcano (VOLC), a maker of devices that detect and treat heart disease, fell 9.4% to $23.25 after announcing plans to sell $100 million of notes convertible into shares. 
• Sport-apparel retailer Zumiez (ZUMZ) jumped 16% to $20.20 after boosting its third-quarter profit forecast to at least 25 cents a share. Analysts had been looking for 24 cents.

Wednesday brings the weekly report on crude oil inventories and a report on industrial production and capacity utilization. In addition, the Federal Reserve Bank of New York's Empire State survey is expected to show a decline in manufacturing. The report comes out Wednesday morning.
 
After today's close, MasterCard (MA) shares moved up 2% to $23.75 after its directors authorized a $1 billion stock buyback. The shares had closed up 3.5% to $199.75 in regular trading.

Gold and the Fed
Gold for December delivery hit a new intraday high of $1,276.50 an ounce before dropping back to a record close of $1,271.70, up 2% from Monday and the biggest percentage gain since February. 

The gold move was based on speculation that the Fed will buy Treasury securities to inject cash into the economy. While that pushed interest rates and the dollar lower, the idea won an endorsement from Jan Hatzius, Goldman Sachs' chief economist.

A purchase of up to $1 trillion in securities would improve stability in financial markets and boost real gross domestic product by as much as 0.4 percentage point, Hatzius told Bloomberg News.

The Fed's Federal Open Market Committee will meet next week to set policy.

Gold's high pushed gold-mining shares higher. Newmont Mining (NEM) rose 4% to $62.85. Barrick Gold (ABX) was up 2.3% to $45.22, and AngloGold Ashanti (AU) was up 4.8% to $46.72.

Crude oil fell 39 cents to to $76.80 a barrel.

Interest rates were lower, with the 10-year Treasury yield falling to 2.666% from 2.741% on Monday. The dollar was lower against the British pound, the euro and the Japanese yen.

Energy prices -- New York close
			Tues.			Mon.			Month chg.			YTD chg.
Crude oil			$76.80			$77.19			6.79%			-3.23%
(per barrel)
Heating oil			$2.1288			$2.1227			6.88%			0.62%
(per gallon)
Natural gas			$3.9660			$3.9380			3.93%			-28.82%
(per mil. BTU)
Unleaded gasoline			$1.9078			$1.9148			6.01%			-4.09%
(per gallon)
Retail gasoline			$2.7170			$2.7090			1.49%			2.96%
(per gallon; AAA)

Retail sales 'reassuring'
U.S. retail sales climbed for a second straight month in August, rising 0.4% after gaining a revised 0.3% in July. Economists had expected sales to decline by 0.1%. Excluding sales of cars and auto parts, sales jumped 0.6%, doubling the forecast. 

Bigger back-to-school discounts, an increase in the number of states offering tax-free holidays and the restoration of extended jobless benefits may have helped boost demand at chains like Kohl’s (KSS) and Ross Stores (ROST).

Consumers’ reliance on incentives is testament to the harm caused by the lack of jobs, one reason why spending may be slow to recover.

Michael Feroli, JPMorgan Chase's (JPM) chief economist called the report "reassuring."

Best Buy's surprising results
Best Buy shares jumped 6% to $36.73 after the company raised its annual profit forecast after second-quarter earnings beat analysts’ estimates on rising sales of mobile phones in the U.S. and overseas.

The company said consumers were "highly selective" on when to shop.

Best Buy earned $254 million, or 60 cents a share, in the second quarter from $158 million, or 37 cents a share, a year earlier. Analysts were looking for 44 cents. Revenue was up 3% to $11.3 billion. Analysts had expected $11.5 billion.

Grocery chain Kroger (KR) said fiscal-second-quarter earnings climbed 1.4% to $261.6 million, or 41 cents a share, beating expectations for a 36-cent-per-share profit. Sales increased to $18.8 billion, more than the $18.7 billion average estimate of analysts. Kroger shares rose 1.1% to $21.26.

 

American International Group (AIG) is in talks with the government to speed up a plan to repay U.S. taxpayers for bailout funds it received, The Wall Street Journal reported. AIG shares fell 2.1% to $36.13.

 

Bank of America (BAC) may look to sell billions of dollars of assets as it struggles to get its unwieldy balance sheet under control. The asset sales may include mortgages and other assets that came when it acquired Countrywide Financial, the Financial Times reported. Shares were off 1.9% to $13.68.

Hewlett-Packard (HPQ) was the top performer among the 30 Dow stocks, up 2.6% to $39.29. There was talk the company may be close to naming a successor to Mark Hurd as CEO. Plus, investors seemed to be cheering the company's deal to buy security-software maker ArcSight (ARST).

Thirteen Dow stocks were higher, along with 65 stocks in the Nasdaq-100 Index ($NDX.X). Gainers were slightly ahead of decliners on the New York Stock Exchange and behind decliners on Nasdaq.

Short hits from the markets -- New York close
			Tues.			Mon.			Month chg.			YTD chg.
Treasury yields
13-week Treasury bill			0.145%			0.135%			7.41%			190.00%
5-year Treasury note			1.428%			1.507%			6.41%			-46.84%
10-year Treasury note			2.666%			2.741%			7.63%			-30.63%
30-year Treasury bond			3.786%			3.842%			7.16%			-18.42%
Currencies
U.S. Dollar Index			81.339			82.186			-1.99%			3.99%
British pound			$1.5559			$1.5432			1.35%			-3.81%
(in U.S. $)
U.S. $ in pounds			£0.6427			£0.6480			-1.34%			3.96%
Euro in dollars			$1.3002			$1.2883			2.55%			-9.28%
(in U.S. $)
U.S. $ in euros			€ 0.7691			€ 0.7762			-2.49%			10.23%
U.S. $ in yen			83.26			83.72			-1.00%			-10.47%
Canada dollar			$0.974			$0.973			3.85%			2.48%
(in U.S. $)
U.S. dollar			$1.027			$1.028			-3.70%			-2.41%
(in Canadian $)
Commodities
Gold			$1,271.70			$1,247.10			1.71%			16.01%
(per troy ounce)
Copper			$3.4685			$3.4790			3.20%			3.65%
(per pound)
Silver			$20.4320			$20.1510			5.33%			21.29%
(per troy ounce)
Wheat			$7.3600			$7.4500			12.80%			35.92%
(per bushel)
Corn			$4.950			$4.8350			16.61%			19.42%
(per bushel)
Crude oil			$76.80			$77.19			6.79%			-3.23%
(per barrel)