Most US stocks gain despite weak retail sales reports

Jan 8, 2009, 23:18 GMT

New York - Most US stocks gained Thursday, despite weak retail sales reports, spurred by a Citigroup agreement that will enable homeowners to avoid foreclosures.

After tumbling Wednesday and suffering a slight setback Thursday morning over retail sales, the markets recovered by afternoon after Citigroup agreed to legislation that will allow bankruptcy courts to reset home loans in an attempt to prevent foreclosures.

But it was a blue Christmas for US retailers who reported poor December sales as consumers cut spending because of the widening recession and soaring job cuts. Many retailers also warned of lower fourth-quarter results.

Wal-Mart Stores Inc, the world's largest retailer, said its fourth-quarter profits will be lower than forecast. While sales from its US stores that have been open at least a year climbed 1.7 per cent in December, the company said its January revenue will remain unchanged.

Clothing retailer Gap reported a 14 per cent drop in sales, while Sears' sales fell 7.3 per cent.

'The market took the Wal-Mart numbers and retail reports in fairly decent stride today,' Frederic Dickson, chief market strategist at DA Davidson & Co, told Bloomberg financial news service. 'Traders are sitting on their hands waiting for the job report tomorrow.'

On Friday, the government will release its unemployment data for December, which are expected to be in the range of 475,000 jobs lost. This would put the total job cuts for 2008 at more than 2 million. The unemployment rate is already 6.7 per cent.

President-elect Barack Obama warned Thursday that the recession in the US could grow 'dramatically worse' and last for years unless 'bold' policies are enacted to reverse the trend.

Unemployment could rise into double digits and the economy could lose 1 trillion dollars of its capacity as the country copes with the poorest economic conditions since the Great Depression of the 1930s, he said.

Obama and his economic advisors are working on a stimulus plan that could reportedly reach up to 1 trillion dollars to pump money into the economy by investing in infrastructure projects, healthcare, education and alternative energy sources.

The blue-chip Dow Jones Industrial Average fell 27.24 points, or 0.31 per cent, to 8,742.46. The broader Standard & Poor's 500 Index gained 3.08 points, or 0.34 per cent, to 909.73. The technology-heavy Nasdaq Composite Index was up 17.95 points, or 1.12 per cent, to 1,617.01.

The US currency fell against the euro to 73.048 euro cents from 73.347 euro cents on Wednesday. The dollar slid against the Japanese currency to 91.333 yen from 92.655 yen on Wednesday.