Updated from 3:20 p.m. ESTStocks finished lower on Friday, amid a disappointing retail sales report that followed the cautious holiday outlooks expressed by Wal-Mart ( WMT - Get Report) and Kohl's ( KSS - Get Report). The Dow fell 69.26 points, or 0.7%, to 9768.68; the S&P 500 dipped 8.06 points, or 0.8%, to 1050.35; and the Nasdaq Composite stumbled 37.09 points, or 1.9%, to 1930.26. The Dow and S&P 500 have now fallen in seven of the nine sessions since hitting new 17-month highs last Monday. Volume on the New York Stock Exchange was 1.34 billion shares, while 1.82 billion shares exchanged hands on the Nasdaq. Ken Tower, CyberTrader's chief market strategist, said "traders were clearly disappointed by this morning's economic news." The government said retail sales dipped by 0.3% in October, slightly worse than economists' expectations. Retail sales fell 0.2% during the same period last year. David Greenlaw, U.S. economist at Morgan Stanley, said the retail sales results were "reasonably close to expectations." In a note to clients, he added, "Clearly, the consumer has taken a bit of a breather over the past couple of months." On the positive side, but with little effect on the market, the University of Michigan's preliminary report on November consumer sentiment came in at 93.5, up from 89.6 in October and slightly ahead of expectations. The producer price index rose by 0.8% in October, four times the consensus expectation. Although it may be an early indication that pricing power is returning, the Federal Reserve has shown no inclination to alter monetary policy. Many economists, and Fed officials themselves, stress that interest rates will stay low until unwanted disinflation has been eliminated. Still-sluggish industrial production data also suggest the Fed is justified in keeping rates low for a "considerable period." Industrial production rose a weaker-than-expected 0.2% in October, while capacity utilization rose to 75% from 74.7%, in line with expectations. The nation's output gap has been one of the key factors restricting corporate pricing power, and Friday's data suggest little improvement on that front.
The combination of mostly weak economic data and dovish comments from Fed officials helped the price on the 10-year Treasury rise 4/32, its yield falling to 4.23%. In a speech Friday morning, Philadelphia Fed president Anthony Santomero said: "Once the current expansion gains a firmer foothold, monetary policy must eventually be moved to a less stimulative and then neutral stance ...
but any policy adjustment need not take place in the near future." This speech followed equally dovish comments from St. Louis Fed President William Poole on Thursday. The dollar fell vs. the euro, but improved slightly vs. the Japanese yen. Gold was again testing new seven-year-high territory, lately up 0.9% to $398.00 per ounce. Drugmakers got a boost on word from Washington that any new Medicare package would likely not allow Americans to buy prescription drugs from Canada, unless health officials deem it safe. Shares of Johnson & Johnson ( JNJ - Get Report) got the biggest boost, rising $2.03, or 4.1%, to $52.13. The Amex Pharmaceutical index rose 1.6% on the day. In earnings news, Dell ( DELL), which was supposed to release third-quarter results after Thursday's close, accidentally reported shortly before the bell. The company reported record earnings of 26 cents a share, up from 21 cents a year ago, in line with expectations. Dell shares declined 28 cents, or 0.8%, to $35.36. Kohl's earned 35 cents per share in the third quarter, short of the 39 cents earned last year, but in line with analyst expectations. The retailer stressed that it was "very cautious" on the outlook for the upcoming holiday season but its shares were nevertheless up $1.29, or 2.6%, to $51.87. On Thursday, retailing stocks were hit hard following disappointing guidance from Wal-Mart and Target ( TGT). Piper Jaffray downgraded Wal-Mart to market perform from outperform Friday, citing lower expected earnings growth next year. Wal-Mart shares dipped 46 cents, or 0.8%, to $55.06. Target fell 32 cents, or 0.8%, to $38.68.
W.R. Hambrecht upgraded Starbucks ( SBUX - Get Report) to buy from hold. After Thursday's close, Starbucks reported that third-quarter earnings improved to 17 cents per share, from 15 cents a year ago, in line with Street expectations. Shares of the caffeine peddler dipped 85 cents, or 2.6%, to $32.15. In IPO news, LECG ( XPRT) shares surged $4.13, or 24.3%, to $21.13 in their first day of trading. The company provides expert witnesses and analysis for legal, legislative and regulatory issues. It's the third IPO this week to debut with strong gains. Overseas markets finished mixed on Friday, with London's FTSE up 0.6% to 4397 and Germany's Xetra DAX higher by 0.8% to 3797. In Asia, the Nikkei fell 1.7% to 10,167, and Hong Kong's Hang Seng declined 0.2% to 12,204. Stocks finished the week lower, amid disappointing economic results and softer-than-expected earnings reports from some of the nation's largest retailers. The Dow finished the week lower by 41.11 points, or 0.4%, to 9768.68; the S&P 500 fell 2.86 points, or 0.3%, to 1050.35; and the Nasdaq led the decline falling 40.48 points, or 2.1%, to 1930.26. Looking ahead, next week's economic calendar is very light. On Tuesday, the Consumer Price Index will be released, and is expected to rise 0.1% in October, after rising 0.2% last year. With third-quarter earnings season drawing to a close, Hewlett-Packard ( HPQ)will report third-quarter results on Wednesday. Followed by, Walt Disney ( DIS)on Thursday. Equity investors will continue to focus on the strength of the retail sector ahead of the holiday shopping season; Gap ( GPS), Nordstrom ( JWN)and Saks ( SKS)are all scheduled to report their third-quarter results next week.