Wall Street started the morning off with a bit of pessimism as stocks and exchange traded funds (ETFs) traded in negative territory on concerns from a weak retail sales, inventory and employment report.

U.S. businesses reduced their inventories for the 10th consecutive month in June, despite total business sales notching the first increase in almost a year, says Martin Crutsinger for the Associated Press. Businesses reduced inventories by 1.1%, slightly more than expected.

The Commerce Department reported that retail sales fell 0.1% last month, missing analysts’ expectations of a gain of 0.7% and marking the first setback following two months of modest sales gains.  Despite this overall weak performance, the “cash for clunkers” program has been a hit, sending sales of automobiles up 2.4% in July.  Despite the news, the Retail HOLDRs (RTH) were up 0.2% in morning trading.

The Labor Department said initial jobless claims increased to a seasonally adjusted 558,000 from the 554,000 reported in the previous week.  Analysts expected new claims to fall to 545,000, while the number of people remaining in the benefit rolls fell to 6.2 million from 6.34 million.

Department store sales fell 1.6% and the broader category of general merchandise stores posted a decline of 0.8%.  This is evident in the performance of Wal-Mart (WMT), which reported flat second-quarter earnings.

Oil rose above $71/barrel  as the International Energy Agency boosted its global crude demand forecast.  Despite the boost in demand forecast, the IEA still states that demand this year will likely fall 2.7% as global economies struggle to emerge from the recession.  The news sent the United States Oil Fund (USO) up 0.6% in morning trading.

Despite opening on a sour note, all three major U.S. indexes jumped into positive territory with the Dow Jones Industrial Average adding 0.1%, the S&P 500 jumping nearly 0.3% and the Nasdaq gaining 0.4%.

For more stories on the retail sector, visit our retail category.

Kevin Grewal contributed to this article.

Tags: Commodity ETFs, Dow Jones Industrial Average, Energy, NASDAQ, Oil, Retail, RTH, S&P 500, Sector ETFs, USO