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Updated from 4:30 p.m. EST

Stocks closed modestly lower Thursday, after a late rally failed to erase losses triggered by disappointing economic and earnings reports, including one from

Wal-Mart

(WMT) - Get Walmart Inc. Report

.

The nation's largest retailer earned 46 cents per share in the third quarter, a penny behind the consensus expectation. Also disappointing, Wal-Mart said it expected fourth-quarter earnings to be in a range of 63 cents to 65 cents, toward the low end of analyst expectations. The company also got stung by UBS, which downgraded the stock to neutral from buy. The shares fell $2.44, or 4.2%, to $55.52, putting pressure on blue-chip proxies.

The

Dow Industrial Average

fell 10.89 points, or 0.1%, to 9837.94, the

S&P 500

declined fractionally to 1058.41 and the

Nasdaq Composite

dipped 5.76 points, or 0.3%, to 1967.35.

Volume on the

New York Stock Exchange

was 1.37 billion shares, while 1.86 billion shares exchanged hands on the Nasdaq.

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On the economic front, initial unemployment claims for the week ending Nov. 8 rose to 366,000 from 353,000 in the previous week. The reading was slightly above economists' expectations, but below the closely watched 400,000 level for a sixth straight week.

The 10-year Treasury bond rallied by 1 2/32 points, its yield falling to 4.26%, following comments from St. Louis

Federal Reserve

President William Poole, in an interview with

Bloomberg

. Poole said that the Federal Reserve may keep interest rates low "well beyond March."

Poole's comments, along with Thursday's benign report on import/export prices, suggest that fears of a less accommodative monetary policy in the near term are unwarranted.

The dollar fell vs. the Japanese yen, and, for a second consecutive session, more sharply vs. the euro. Putting pressure on the dollar, the U.S. trade deficit widened slightly more than expected to $41.2 billion in September, from $39.5 billion. Dollar weakness helped gold extend Wednesday's rally; gold futures rose 0.2% to $394.30 per ounce.

Robert Pavlik, portfolio manager with OakTree Asset Management, said "profit-taking from yesterday and the disappointing trade deficit" are both responsible for pushing the markets lower.

"The claims number came out right in line with expectations, but if it had been better, it could have offset the negative reaction to the trade deficit," Pavlik added.

Elsewhere on the earnings front,

Target's

(TGT) - Get Target Corporation Report

profit rose to 33 cents per share, from 30 cents last year, in line with Wall Street expectations. Target shares dropped 93 cents, or 2.3%, to $39.00.

Tiffany

(TIF) - Get Tiffany & Co. Report

earnings were 19 cents a share in the third quarter, in line with analysts' expectations. The company raised guidance for 2004 but expressed some disappointment with its business in Japan. Tiffany shares were down $3.41, or 7.1%, to $44.72.

Late Wednesday,

Applied Materials

(AMAT) - Get Applied Materials, Inc. Report

reported fiscal fourth-quarter earnings of 6 cents a share, excluding charges, down from 9 cents a year ago but a penny better than consensus estimates. The company also offered upbeat guidance but its shares dropped 68 cents, or 2.7%, to $24.76.

Dell

(DELL) - Get Dell Technologies Inc Class C Report

, who was supposed to release third-quarter results after the close, accidentally reported shortly before the bell. The company's earnings improved to 26 cents, from 21 cents a year ago, in-line with expectations. Dell shares fell 3 cents, or 0.1%, to $35.64.

Ford

(F) - Get Ford Motor Company Report

was upgraded to outperform from peer perform by Thomas Weisel Partners. Wednesday, S&P downgraded Ford's credit rating to triple-B-minus, one notch above junk status, but Weisel was encouraged that S&P moved Ford's outlook to stable and remains confident in Ford's turnaround prospects. Ford shares were up 8 cents, or 0.6%, to $13.14.

Bucking the downward trend, a favorable report on its Lipitor cholesterol medication sent

Pfizer

(PFE) - Get Pfizer Inc. Report

shares higher by $1.03, or 3.2%, to $33.43. This helped to push other drugmakers higher. The Amex Pharmaceutical index rose 2.8% on the day.

In IPO news,

Tessera

(TSRA)

shares surged $5.50, or 42.3%, to $18.50, after the semiconductor packaging designer began trading this morning.

Boeing

(BA) - Get Boeing Company Report

shares improved by 78 cents, or 2%, to $39.85, after the company announced that it has signed a contract to sell thirty 737 planes to Chinese airlines.

Overseas markets finished higher on Thursday, with London's FTSE up fractionally to 4373 and Germany's Xetra DAX up 0.5% at 3766. In Asia, the Nikkei finished higher by 1.1% to 10,338, and Hong Kong's Hang Seng improved by 2.1% to 12,228.

Tomorrow, the markets will focus on a number of notable economic releases, including the producer price index, industrial production and capacity utilization. No major earnings releases are scheduled.

Of particular interest, given the week's focus on retailers, will be the October retail sales report and the November University of Michigan consumer sentiment survey, also due out tomorrow morning. Retail sales are expected to drop by 0.2% in October, after a similar decline last month. Consumer sentiment is expected to improve to 92.0 from 89.6.

In light of today's disappointing results from some of the nation's largest retailers, any upside surprise in the U.S. consumer, ahead of the important holiday shopping season, could help the equity markets bounce back.