Retail stocks decline in slow trading Dow off 1

June 03, 1994|By Bloomberg Business News

NEW YORK -- U.S. stocks were mixed yesterday as Sears, Roebuck & Co. and other retailers posted lackluster sales gains in May.

Trading was slow as investors waited for today's report on May employment for a clearer picture on inflation in the economy.

If employment grew more than predicted, the Federal Reserve will be more likely to raise interest rates for the fifth time this year to ward off inflation, traders said. As rates rise, stocks become less attractive relative to fixed-income securities.

Sears fell $1.75, to $50, leading the drop in the Dow Jones industrial average, which fell 1.84, to 3,758.99. Retailing shares also were the biggest decliners in the Standard & Poor's 500, which edged up 0.02, to 457.65.

"Sears was pretty ugly, and J. C. Penney was pretty ugly, and that probably hurt the market," said Edward Laux, head trader at Kidder, Peabody & Co. "It's their day to be hated."

Shares of J. C. Penney Co. fell $2, to $48.75; Wal-Mart Stores Inc. slipped 37.5 cents, to $22.50; Mercantile Stores Co. Inc. lost 50 cents, to $34.375; and Melville Corp. fell 25 cents, to $39.75.

The Nasdaq composite index climbed 3.98, to 739.50. Shares of Oracle Systems Corp., Tele-Communications Inc., American Power Conversion, Price/Costco Inc. and Comcast Corp. led the index higher.

Within the Dow industrials, gains in Boeing Co., Caterpillar Inc., AlliedSignal Inc., and Walt Disney Co. offset losses in Sears and International Business Machines Corp.

AlliedSignal rose 62.5 cents, to $35.375, after receiving a $2 billion contract to provide equipment to Boeing Co. for its next generation of aircraft, the 737-X. Separately, Boeing said it will lease seven 767-300

extended-range planes to KLM Royal Dutch Airlines. Boeing jumped $1.125, to $47.875.

U.S. retailers reported mixed sales results for May. Analysts said one of the few discernible patterns was the continued weakness of clothing sales relative to sales of hard goods, such as furniture and appliances.

Trading was slow, with 272 million shares trading hands on the New York Stock Exchange, below the 293.9 million share average during the last three months.

Stocks gained earlier in the day, after government reports suggested the economy faces little threat from inflation, easing concern that the Fed would raise rates again.

"The worst fears about higher interest rates have ebbed," said Eugene Peroni, market analyst at Janney Montgomery Scott Inc. in Philadelphia. "Inflation may not be as virulent as expected."

The government's main gauge of future growth -- the index of leading economic indicators -- was unchanged in April, the Commerce Department said. Slower economic growth means less inflation and less chance interest rates will rise.

The diminished threat of inflation, which eats away at the return of fixed-income securities, helped bonds, and the yield on the 30-year Treasury bond closed at 7.34 percent, down from 7.39 percent Wednesday.

Shares of IDB Communications Group, Oracle Systems, Wal-Mart Stores Inc. and Newbridge Networks Corp. were the most actively traded stocks.

Disney rose 25 cents, to $43.875. The company said Euro Disney, which is struggling to refinance its debt, got a powerful new backer, Saudi Prince Al-Waleed Bin Talal Bin Abdulaziz Al Saud.

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