Wall St seesaws as US retail sales fall short

William Mcinerney, right, works with fellow traders on the floor of the New York Stock Exchange. File photo / AP

Wall Street seesawed overnight, with the Dow Jones Industrial Average fluctuating between losses and gains, as a disappointing report on US retail sales and concern about a slump in bonds offset corporate activity.

A Commerce Department report showed US retail sales were flat in April, compared with expectations for a 0.2 per cent gain. The data highlights recent weakness in consumer sentiment and GDP, even as the US jobs market continues to surprise on the upside, and suggests the economy's sluggishness from the first quarter lingers.

The data also suggested the Federal Reserve has now even less reason to raise interest rates any time soon. The US dollar slid, as a result.

"Hopes for a strong rebound are now fading," Thomas Costerg, an economist at Standard Chartered Bank in New York, told Reuters. "The likelihood of a near-term Fed action is almost zero now."

Even so, analysts remain optimistic on both the US consumer and the economy.

"We are seeing some evidence that the weakness in the first-quarter has spilled over to this quarter, but I'm not concerned that US consumer spending for the year is at risk," Jeremy Zirin, head of investment strategy at UBS Wealth Management in New York, told Reuters.

John Ryding, chief economist at RDQ Economics in New York, agreed.

"We remain puzzled by the softness in retail sales given the gains in employment, real incomes from lower energy prices, and wealth, but we continue to look for consumer spending to pick up this year," Ryding told Reuters.

Meanwhile, the pressure on rates continued in the bond market, pushing yields on the 10-year US benchmark bond to the highest level in nine months. Higher yields make fixed-income securities more appealing to investors.

In late trading in New York, the Dow Jones Industrial Average slipped 0.05 per cent. The Standard & Poor's 500 Index eked out a 0.03 per cent gain, while the Nasdaq Composite Index rose 0.21 per cent.

A slump in DuPont shares, last trading 6.6 per cent lower, dragged the Dow lower. Shares of Home Depot and those of Wal-Mart also fell, down 1.1 per cent and 1 per cent respectively.

Still, corporations keep showing clear confidence in valuations with a fresh round of acquisitions.

Shares of Williams Partners soared, last trading 21.1 per cent, higher after Williams Cos said it would agree to buy the 40 per cent it doesn't already own for about US$13.8 billion.

"M&A will continue to be strong as companies are more confident about spending excess cash and as debt continues to be cheap," Jeff Kravetz, regional investment director at US Bank Wealth Management in Phoenix, Arizona, told Reuters.

In Europe, the Stoxx 600 Index ended the day with a 0.2 per cent decline from the previous close. Earlier in the session it had gained as much as 1.1 per cent, according to Bloomberg.

A report showed the euro-zone economy expanded 0.4 per cent in the first quarter, its best clip in nearly two years. Still, the pace of growth in Germany, the region's engine economy, disappointed as it slowed to 0.3 per cent, down from 0.7 per cent in the previous period.

The euro benefited.

"On the European side, we have had some good numbers, and on the other side, people have been disappointed in the performance of US data, and that is weighing on the [US] dollar and allowing the euro to trade higher," Sonja Marten, a currency strategist at DZ Bank in Frankfurt, told Bloomberg.

France's CAC 40 Index fell 0.3 per cent, while Germany's DAX slid 1.1 per cent. The UK's FTSE 100 Index rose 0.2 per cent.