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Stocks Take a Spill

Robert Holmes

Stocks fell Thursday despite an avalanche of better-than-expected sales reports from the nation's chain stores, as investors fretted about the subprime-lending market and the housing sector.

The Dow Jones Industrial Average lost 29.24 points, or 0.23%, to 12,637.63, and the S&P 500 was off 1.71 points, or 0.12%, at 1448.31. The Nasdaq Composite was down 1.83 points, or 0.07%, to 2488.67.

Roughly 2.66 billion shares changed hands on the New York Stock Exchange. Decliners beat advancers by a 6-to-5 margin. Volume on the Nasdaq topped 2.01 billion shares, with losers outpacing winners 8 to 7.

"The last three or four days we had average volume with low volatility and managed to have slight gains," said Phillip Roth, chief technical market analyst with Miller Tabak. "Today we saw the same thing but we edged lower. The market is stalling, but as long as we don't have an accelerated selloff we should remain in an upward trend."

Homebuilders were the worst performers of the session following a weak revenue forecast from Toll Brothers (TOL Quote). The Philadelphia Housing Sector index fell 2.1%.

Champion Enterprises (CHB Quote) lost 5.5%, Hovnanian (HOV Quote) finished down 4.3%, Ryland Group (RYL Quote) was off 3.5%, and Meritage Homes (MTH Quote) slumped 2.7%.

Meanwhile, publicly traded lenders dropped. HSBC (HBC Quote) said it would have to spend 20% more than originally thought this quarter to cover loans that went bad, sending its shares lower by 2.7% to close at $89.78.

Subprime lender New Century Financial (NEW Quote) sank 36.2% after it said it would unexpectedly post a fourth-quarter loss and have to restate some results.

Financing concerns Countrywide Financial (CFC Quote) and Novastar (NFI Quote) also finished with losses.

Before the market opened, investors started sifting through the barrage of monthly retail reports, most of which beat expectations. Wal-Mart (WMT Quote) confirmed this weekend's announcement about its January sales, saying comparable-store revenue climbed 2.2% last month.

Rivals Target (TGT Quote) and Kohl's (KSS Quote) both reported strong same-store growth for the month that easily beat estimates.

Among other names topping forecasts were JC Penney (JCP Quote) and Aeropostale (ARO Quote). Gap (GPS Quote) reported flat sales for January, while estimates were for a decline of 7.7%.

On the weak side were Sharper Image (SHRP Quote), where comps fell 25%, and Ann Taylor (ANN Quote), with a decline of 10.2%.

Generally speaking, stocks haven't moved a great deal this week, but tech shares finally caught a bid Wednesday thanks to gains in networking leader Cisco (CSCO Quote). The Nasdaq rose 19.01 points, or 0.77%, to 2490.50.

As for the Dow, it hit an intraday record high of 12,700.28 but pulled back to finish up just 0.56 point at 12,666.87. The S&P 500 added 2.02 points, or 0.14%, to 1450.02.

Following the previous close, Dow component Disney (DIS Quote) posted strong earnings, buoyed by asset sales and a solid performance by its film studios. Excluding items, Disney earned 50 cents a share, topping estimates by 11 cents. Revenue rose to $9.73 billion for the first quarter, up from the prior year's $8.85 billion. Disney slid by 19 cents, or 0.5%, to $35.29.

Qwest Communications (Q Quote) swung to a fourth-quarter profit of $194 million, or 10 cents a share from the year-ago period. Results beat the Thomson First Call average estimate of 8 cents a share. However, revenue was flat compared to a year ago, and Qwest lost 9 cents, or 1.1%, to $8.16.

PepsiCo (PEP Quote) said it had a fourth-quarter profit of $1.78 billion, or $1.06 a share, up 61% from a year earlier. Excluding items, the company earned 72 cents, matching estimates. After opening higher, the stock gave back $1.19, or 1.8%, to close at $63.31.

After the market closes, Broadcom (BRCM Quote) will report fourth-quarter earnings results.

Commodities finished a choppy session with gains. Oil was higher by $2 to close at $59.71 a barrel, its highest level of the year. Gold ended with a gain of $5.50 to $662.80 an ounce, and silver added 11 cents to $13.82 an ounce.

On the economic calendar, the Labor Department said initial jobless claims rose by 3,000 to 311,000 last week. Elsewhere, the Commerce Department said wholesale inventories fell 0.5% in December. Economists expected a 0.6% rise.

Stocks were falling in Europe, where London's FTSE 100 was lower by 0.4% to 6346 and Frankfurt's Xetra DAX was down 0.6% at 6877. As for Asia, Tokyo's Nikkei 225 rose 0.4% to 17,406, and Hong Kong's Hang Seng was up 1% to 20,655.