Stocks shrug off data; Dow gains 37

US markets muster a modest rally despite weak retail sales and a rise in jobless claims. Financials are strong, led by B of A.

By Mark Baumgartner Aug 13, 2009 2:40PM

stocks  © Digital Vision/SuperStock


Updated: 4:50 p.m. ET


Major stock indexes held gains from Wednesday's Fed-fueled rally despite the release of fresh data showing that the economy continues to face strong headwinds.


Retail sales unexpectedly fell and weekly jobless claims unexpectedly rose. And foreclosure activity in July hit a new record.

Better-than-expected earnings from Wal-Mart (WMT) helped offset the disappointing news, as did strength in overseas markets. Asian markets rose after Fed policymakers on Wednesday said the U.S. recession appears to be "leveling out," and European markets were bolstered by data suggesting recessions have ended in Germany and France.


The Dow Jones Industrial Average ($INDU) added 37 points, or 0.4%, at 9,398.


The Standard & Poor's 500 Index ($INX) put on 7 points, or 0.7%, at 1,013, and the Nasdaq Composite Index ($COMP) was up 11 points, or 0.5%, at 2,009.


Analysts said it appears that auto sales through the Cash for Clunkers program were made at the expense of other retail sales. Retailers saw a 0.1% decline in July, the Commerce Department said, significantly worse than the 0.7% gain economists were expecting.


"It's premature to talk about the sustainability of a recovery (until there's) follow-through on the demand side," said economist Michael Gregory at BMO Capital Markets in an interview with Bloomberg News.  


Initial weekly jobless claims rose by 4,000 to 558,000 in the week ended Aug. 8, the Labor Department said. It was the sixth consecutive week that initial claims stayed below 600,000. Still, economists say unemployment claims need to fall to 350,000 before they feel comfortable proclaiming that the jobs market has stabilized.


Financial stocks lead gainers


Financial stocks were higher for a second consecutive day. Bank of America (BAC) was boosted by news that a hedge fund controlled by billionaire investor John Paulson has purchased 168 million shares in the Charlotte, N.C., company. Bank of America shares gained $1.07, or 6.7%, to close at $17.


The hedge fund, Paulson & Co., also took a significant stake in Regions Financial (RF), becoming the bank's second-bigget shareholder. The stock was up 38 cents, or 7.9%, at $5.20 in afternoon trading.


Shares of Apple (AAPL) were higher after Barclays Capital raised its price target on the stock by $20 to $208, citing the Cupertino, Calif., company's product pipeline and prospects for strong free cash flow. The stock surged $3.11, or 1.9%, to close at $168.42.


PC maker Dell (DELL) rose 45 cents, or 3.3%, to close at $14.29 after JPMorgan put a "buy" rating on shares of the Round Rock, Texas, company.


Wal-Mart credited tighter inventory controls in saying that it earned more than expected in the second quarter. But same-store sales were down on continued weakness in consumer spending. Shares in the Bentonville, Ark., retailer added $1.37, or 2.7%, to end the session at $51.88.


Wal-Mart said it expects same-store sales to be flat to up 2% in the current quarter, which some investors took as a troubling indicator that retailers should expect a tepid back-to-school season.


Treasury prices rose today after the government auctioned off $15 billion in 30-year bonds, capping off a strong week in which the United States took in $75 billion in debt sales. The demand for Treasurys sent yields sharply lower.


Gold prices were higher and the dollar fell against major currencies. The low-yielding dollar has been shunned since equities began gaining traction last spring; prospects that the greenback would bounce back dimmed with today's weak retail report and after the Fed vowed to hold interest rates low for a while.


Major U.S. employers are growing more optimistic, The Wall Street Journal reported, citing a survey of human-resources executives at 175 midsize and large companies by Watson Wyatt Worldwide (WW).


The survey found that some companies are planning to unfreeze salaries and resume hiring in the coming months, but found employers may be slow to restore cuts in benefit programs.


Elizabeth Strott contributed to this report. Charley Blaine is away today.


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