Stocks Shake Off Negatives - TheStreet

Stocks Shake Off Negatives

Retail sales trump rising energy prices and jobless claims.
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Complacency seems to be returning to the market as equities drifted higher Thursday in the face of rising energy prices and higher jobless claims.

Strong retail-sales figures for March trumped all of the usual headwinds, as 79% of retailers beat analyst expectations, according to Thomson Financial. Investors are relinquishing some of their worries about economic growth with every tidbit of positive news about the U.S. consumer.

Consumer spending comprises about 70% of U.S. GDP, and the market may be starting to discount the strong retail report Monday from the Census Bureau.

"The strength

of retail sales is squarely at odds with the expectation for weaker consumer spending that is the crux of the bear case," writes Randy Diamond, trader at Miller Tabak. But Diamond warns investors should not ignore or make excuses for the bad news either.

Investors shrugged off the highest jobless-claims report in two months and focused on March's Easter and spring break-driven retail sales, instead of the warnings about weak April reports. Likewise, investors seem to have ignored signals from the energy complex that gasoline prices could be a drag on consumer spending as summer driving season starts.

The

Dow Jones Industrial Average

jumped back on the winning streak by adding 0.6% to close at 12,552.96. The

S&P 500

gained 0.6% Thursday to close at 1447.80, and the

Nasdaq Composite

gained 0.9% to close at 2480.32.

"Momentum is driving this," says Diamond. "Investors can't miss the upside, but they are also equally if not more terrified of holding the bag if the market fails."

The world's largest retailer,

Wal-Mart

(WMT) - Get Report

posted strong sales in March, but warned that its first-quarter earnings guidance may be hard to meet. The company's shares slipped only 0.02% on the day.

Target

(TGT) - Get Report

gained 0.5% on news that it met expectations, while

Costco

(COST) - Get Report

added 1.2%.

Apparel retailers

Gap

(GPS) - Get Report

,

Ann Taylor

(ANN)

and

Limited Brands

(LTD)

surprised investors and beat analyst expectations for sales, but their shares were weaker on the day, falling 0.05%, 0.2%, and 2.9%, respectively.

Energy stocks also gained Thursday as oil prices jumped $1.84 or 3% on the day to close at $63.85 per barrel. Gasoline prices went up 4 cents or 1.9% Thursday to close at $2.19 per gallon. The

Oil Services HOLDRs

(OIH) - Get Report

jumped 1.9%.

Exxon Mobil

(XOM) - Get Report

and

Chevron

(CVX) - Get Report

added 0.8%.

Energy prices are likely to continue their climb because refining capacity is coming back online after routine annual shutdowns and several refinery fires. So increased capacity plus rising demand for gas in the warmer weather means refiners buy more oil. In terms of gasoline, some analysts suggest prices could go as high as $3.50 per gallon.

Earnings season is benign thus far, giving traders no reason to hit the sell button,

Research in Motion

(RIMM)

being a notable exception Thursday.

The first week is typically bookended by

Alcoa

(AA) - Get Report

and

GE

(GE) - Get Report

, but the meat of the reports and perhaps the warnings arrive next week -- atop a massive economic calendar.

Both Alcoa and GE's reports are revealing about economic strength. Strong demand for aluminum drove Alcoa's report, but conglomerate GE may offer a

broader view when it reports on Friday.

Investors also shrugged off further news that dents the theory that merger and acquisition activity will swallow up every stock on the market.

Dow Chemical

(DOW) - Get Report

fired executives for engaging in unauthorized buyout talks, rumors of which flooded the market for weeks. Also, reports of a private equity buyout of

Gold Fields

(GFI) - Get Report

are now looking likely to be fraudulent. Dow gained 2%, and Gold Fields added 0.1% on the day.

There wasn't a lot of conviction in the market Thursday, according to Marc Pado, chief market analyst at Cantor Fitzgerald.

That said, the CBOE Volatility Index, the so-called fear index, fell 5.8% on the day. The VIX's decline suggests the same complacency that drove the markets into their late February correction may be back on the rise.

In keeping with TSC's editorial policy, Rappaport doesn't own or short individual stocks. She also doesn't invest in hedge funds or other private investment partnerships. She appreciates your feedback. Click

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