The Evening Wrap: Not So Vital Signs
While slow growth and its symptoms continue to plague the U.S. economy, those attending to Europe's economic health showed increased concern about their patient Thursday.</br></br>First, the New World and its ills. On Thursday U.S. retailers reported their results for July, and they were generally weak and in numerous cases short of expectations. The housing slump and high gasoline prices have damped consumer spending, but in previous month tax rebates made their way in store cash registers. That was less the case in July. "With the end of the stimulus checks, we know consumers are spending more cautiously, and we continue to see a pronounced paycheck cycle at the end of the month," said Eduardo Castro-Wright, head of Wal-Mart's U.S. operations. The giant retailer, in fact, did relatively well, posting a 3% rise in sales, excluding fuel, at stores open at least a year. The conventional wisdom is that discounters are faring relatively well as budget-stressed consumers pinch pennies. However, Wal-Mart rival Target reported another stagnant month, while many apparel outlets continued to struggle. The latest weekly reading on unemployment claims was hardly encouraging, as they rose to a six- year high. Economists cautioned that a recent federal extension of benefits may have drawn in applicants in a one-time effect. Nonetheless, Merk Investments' Joseph Brusuelas wrote that the four- week-average for jobless claims looks to remain above the 400,000 threshold that "traditionally implies a recession in the labor sector." In what passes for good economic news these days, the National Association of Realtors' index for pending sales of existing homes increased at a seasonally adjusted annual rate of 5.3% in June. Still, the index, based on signed contracts for used homes, was more than 12% below year-earlier levels, and some economists surmised that sales of foreclosed homes boosted the index. Now, onto the Old World. On Thursday, the European Central Bank and Bank of England left their key policy interest rates unchanged, at 4.25% and 5%, respectively. Recent weak economic reports and deteriorating confidence measures in the 15 countries that share the euro "clearly suggests the materialization" of some risks to growth, said ECB President Jean- Claude Trichet, whose clear bias -- and mandate -- has been to fight inflation. Midyear economic activity will be "particularly weak," he said, confirming the economy will "trough" in the second and third quarters amid a global slowdown, still-high commodity prices and credit-market woes. The U.K. economy, meanwhile, has been showing American-like housing woes. Its central bank in April cuts rates, but has held steady since as inflationary pressures persists. Old, new, the diagnosis isn't anywhere near robust.</br></br>---</br></br>Stocks Retreat</br></br>The U.S. jobless data and reports from retailers weighed on stocks, as did AIG's weak earnings report late Wednesday and a word of caution from Moody's about its credit rating on American Express. At the close, the Dow Jones Industrial Average was down 224.64 points, or 1.9%, at 11431.43. The Nasdaq Composite Index slipped 1% to 2355.73. The S&P 500 dropped 1.8% to 1266.07. Crude-oil futures snapped a three-day losing streak to end $1.44 higher, up 1.2%, at $120.02 a barrel in New York following reports that a key oil pipeline supplying crude to Europe could be shut for five weeks.