ETFs React to Strong Retail Sales, Egypt Clashes

February 3rd at 8:30am by Tom Lydon

Despite a dip in jobless claims, strong retail sales, rising factory orders and a spate of positive earnings reports, stocks and exchange traded funds (ETFs) turned negative at the market’s open.

  • New U.S. claims for unemployment benefits dropped more than expected last week, a government report showed on Thursday, pointing to continued gradual improvement in the labor market. U.S. nonfarm productivity grew faster than expected in the fourth quarter as employers extracted more output from workers and unit labor costs fell, a government report showed on Thursday.
  • Orders to U.S. factories rose in December, pushed up by stronger demand from businesses for machinery and communications equipment. Factory orders increased 0.2 percent in December, the Commerce Department said Thursday. They have risen in five of the past six months. Manufacturing has been one of the standout performers in the current recovery and economists predict further gains this year. The PowerShares Dynamic Industrials ETF (NYSEArca: PRN) rose in early trading.
  • Major retailers are reporting surprisingly solid January revenue gains despite snowstorms that many feared would chill spending. The reports offer encouraging signs that strength in consumer spending is being sustained after a robust holiday season. As merchants reported their figures Thursday morning, many retailers, including Costco Wholesale Corp. (NYSE: COST), Victoria’s Secret parent Limited Brands (NYSE: LTD) and teen retailer Wet Seal Inc. (NASDAQ: WTSLA), posted gains that beat Wall Street expectations. The SPDR S&P Retail ETF (NYSEArca: XRT) rose almost 2% today.
  • Shares of drug giant Merck (NYSE: MRK) are down 3% after saying it swung to a fourth-quarter loss from a profit in the year-ago period, while sales rose. “These results clearly demonstrate the benefits of the post-merger Merck with our broader product portfolio, robust late-stage pipeline and expanded global footprint,” CEO Kenneth Frazier said in a statement. iShares Dow Jones U.S. Pharmaceutical (NYSEArca: IHE) is down slightly today as a result; Merck is 7.6%.
  • Shares of Dow Chemical (NYSE: DOW) rose in early trading after the company reported a surge in quarterly profit. Dow Chemical said fourth-quarter earnings topped analysts’ expectations as sales rose in emerging markets. Sales rose 22% to $13.8 billion on double-digit gains in all geographic areas and in all operating segments except one – sales at coatings and infrastructure rose 6%, the company said in a press release Thursday. Vanguard Materials Sector (NYSEArca: VAW) is down 0.5% today; DOW is 6.8%.

Gregory A. Clay contributed to this article.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.