Stocks Finish Mixed as Retail Sales Data Disappoint

NEW YORK (TheStreet) -- U.S. stocks finished mixed Tuesday on fears of European headwinds and a mixed bag of domestic corporate and economic news.

The Dow Jones Industrial Average rose 4.2 points, or 0.03%, at 12,878. The S&P 500 fell 1.3 points, or 0.09%, at 1351.

The Nasdaq was up less than a point, or 0.02%, at 2932.

"Investors are fairly incentivized to take some risk," says Jason Pride, director of investment strategy at Glenmede Investment Management. "It's not to say a pullback isn't possible, but you need to have risk assets in your portfolio that can also absorb shocks in a sub-par economic environment... It's important to find a comfortable medium."

Debt downgrades of six European countries by Moody's Investors Service cast a shadow on the trading session, a fresh reminder of economic weakness in the region. The list of countries being downgraded includes Italy and Spain, which have now lost their triple-A ratings, Portugal, Slovakia, Slovenia and Malta.

On Tuesday, Greek bailout discussion suffered another setback as a meeting between European finance leaders to discuss the package, scheduled for tomorrow, was cancelled after Greece failed to meet demands by its creditors on time.

In domestic news, the Commerce Department said that U.S. retail sales for January rose 0.4%, short of the expected 0.9% increase, according to Thomson Reuters. Sales were downwardly revised to unchanged in the previous month.

In a separate report from the Labor Department, import prices for January increased by 0.3% on a sequential basis, reversing a 0.1% decrease in December, as economists had expected. Import prices were up 7.1% year-over-year, while export prices were up 2.5% year over year.

The Commerce Department reported that business inventories rose only 0.4% December, less than the expected 0.5% rise. Inventories climbed less than sales, suggesting that companies that inventory replenishment from the last quarter may extended into 2012.

In Europe, a reading on German investor confidence rose to its highest level in 10 months, according to the ZEW Center for Economic Research in Mannheim. European stocks gave up earlier gains after the morning's economic releases from the U.S. Germany's DAX closed down 0.15% while London's FTSE finished down 0.1%. Japan's Nikkei Average settled up 0.59%, and Hong Kong's Hang Seng was up 0.15%.

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In corporate news, Rackspace Hosting(RAX), the cloud computing software maker and data center services provider topped fourth-quarter earnings and revenue expectations. The company reported earnings of $25 million, or 18 cents a share, in the quarter on revenue of $283.3 million. The performance beat the average estimate of analysts polled by Thomson Reuters for a profit of 15 cents a share in the quarter on revenue of $281 million. Rackspace shares surged 12.6% to $55.45.

Yahoo!(YHOO) shares tumbled 4.7% to $15.36 on reports that Internet company's complex talks about possible sales of Asian assets in the most tax efficient manner have broken down. Yahoo has wanted to sell most of its 40% stake in Chinese Internet giant Alibaba as well as its 35% stake in Yahoo Japan.

Beauty and household products maker Avon(AVP) reported fourth-quarter adjusted income of $172 million, or 39 cents a share, falling below the average analyst estimate of 51 cents. Shares gained 1.5% to $17.80.

Zynga(ZNGA), the largest social gaming company in the world, is expected by analysts to post a small profit in its first quarterly report as a public company. Zynga, knowns for its Facebook games such as "FarmVille" and "Words with Friends," is forecast to earn 3 cents a share on revenue of $302 million, up from year-earlier revenue of $195.8 million. Shares jumped 7% to $14.35.

Boeing(BA) said Tuesday it finalized an order from Indonesia's Lion Air for 230 airplanes valued at $22.4 billion, Boeing's largest ever commercial airplane order. Boeing said Lion Air's order includes 201 737 MAXs and 29 next-generation 737-900 ERs. Shares were up 1% to $75.56.

Apple(AAPL) is working with component suppliers in Asia to test a new tablet computer with a smaller screen, The Wall Street Journal reported, citing people familiar with the situation. Officials at some of Apple's suppliers, who declined to be named, said Apple has shown them screen designs for a new device with a screen size of around 8-inches, and said it is qualifying suppliers for it.

Apple's iPad 2, launched in 2011, comes with a 9.7-inch screen. Apple shares on Monday topped $500, finishing the trading session up 1.9% at $502.60. Shares closed up 1.4% at $509.46 Tuesday.

March oil futures were up 6 cents at $100.97 a barrel. In other commodities, April gold futures settled down $7.20 at $1,717.70 an ounce.

The dollar index was up 0.4%. The benchmark 10-year Treasury was up 13/32, diluting the yield to 1.931%.

--Written by Andrea Tse and Chao Deng in New York.

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