The Labor Department has reported that the number of newly laid-off workers last week dropped to 512,000, the lowest point since January. It’s also 4,000 fewer than what economists had forecast. The report has a downside, though: worker productivity in the third quarter rocketed by 9.5%. This means that employers are becoming more efficient and more productive, so companies will have little reason to hire more, report Martin Crutsinger and Christopher S. Rugaber for the Associated Press.

The European Central Bank kept interest rates at a record low today, as expected. Later, the bank’s president will hold a press conference that many expect will give hints as to when the ECB will begin to cut back on bank lending and whether it intends to charge them more for 12-month money, reports Jana Randow for Bloomberg. iShares MSCI EMU (NYSEArca: EZU) is up about 1.5% this morning. (How Europe can keep the ball rolling).

The outlook for retailers brightened somewhat in October. Chain-store sales notched their second consecutive gain, and it was the best performance for the industry in more than a year. The industry reported an overall 1.8% sales jump at stores open for at least a year, reports Stephanie Rosenbloom for The New York Times. Not entirely surprisingly, chains that sell designer brands at a discount were the strongest performers. SPDR S&P Retail (NYSEArca: XRT) is down about 0.7% this morning. (Brand names boost consumer staples).

Climate legislation received a boost today as Senate Democrats received approval of a cap-and-trade bill that aims to reduce U.S. greenhouse gases. Republicans object to the legislation because they feel that it’s being rushed, reports Simon Lomax for Bloomberg. The House bill seeks to reduce emissions by 17% below 2005 levels by 2020; the Senate bill is calling for a deeper cut of 20%. iShares S&P Global Clean Energy Index (Nasdaq: ICLN) is up nearly 2% this morning.

For full disclosure, Tom Lydon’s clients own shares of EZU.

The Federal Reserve policymakers are anticipated to leave interest rates at record lows in order to entice Americans to continue to spend. They’re also expected to address the financial and economic strides the country has made in recent months, reports Jeannine Aversa for the Associated Press.

The service sector grew for the second consecutive month. The reading didn’t meat analysts’ forecasts, but the reading was above 50, indicating expansion. There was also encouraging news about the labor market: the number of private sector jobs lost in October was down for the seventh consecutive month, report Sara Lepro and Tim Paradis for the Associated Press.

Retailers had their best month in ages in October. Individual chains will report sales tomorrow, and the numbers are expected to be their strongest yet, The New York Times reports. Enthusiasm is on the restrained side; after all, consumers still aren’t spending at the level that economists would like. Sales of women’s clothing, for example, are 12.2% lower than they were in October 2007. SPDR S&P Retail (NYSEArca: XRT) is up about 0.25% this morning. (Why name brands are back in favor).

Time Warner (NYSE: TWX) posted a quarterly profit and stated that its business outlook had improved in the third quarter. The television and film units outperformed, but media subscriptions and ad sales are down, reports David Goldman at CNNMoney.

Comcast (Nasdaq: CMCSA) also reported earnings this morning, noting that they jumped 22% in the third quarter. Losses in television subscriptions were offset by gains in their Internet and voice divisions, reports Lance Whitney at Cnet News. PowerShares Dynamic Media (NYSEArca: PBS) is up about 1% this morning; Time Warner is 5.2%; Comcast is 4.9%.

For the third consecutive month, home prices rose in August. The Standard & Poor’s/Case-Shiller index showed the prices rose 1% from July in 20 major cities. Prices are still down 11.4% from a year ago, reports J.W. Elphinstone for the Associated Press.

Consumer confidence fell in October to 47.7, the second-lowest reading since May. Analysts had expected a reading of 53.1. Any reading above 90 indicates the economy is on solid footing; a reading above 100 indicates solid growth, reports Ashley M. Heher for the Associated Press. Fewer jobs, lower salaries and a gloomy business climate are bringing shoppers down and keeping them reluctant to spend. Retail Select Sector SPDR (NYSEArca: XRT) is down nearly 2% this morning. (A holiday ETF?)

BP (NYSE: BP) reported a bigger-than-expected profit in the third quarter, even though lower oil and gas prices put a dent in its earnings. BP met its target by cutting costs by $3 billion. WisdomTree International Energy (NYSEArca: DKA) is up 1.5% this morning; BP is 8.6%.

United States Steel (NYSE: X) posted its third consecutive quarterly loss, thanks to the global economic downturn, which has depressed steel demand. The company did note that production and shipments rose from the second quarter and that a narrower loss in the fourth quarter is expected. Market Vectors Steel (NYSEArca: SLX) is down nearly 2.5% this morning; United States Steel is 5.1%. (Where steel and copper are going).

The picture of the U.S. consumer has shifted from one of spendthrift to bargain hound, and this new mindset has retailers up in arms as the holiday season approaches. Even if the economy picks up, some retail veterans think it could be 10 to 15 years before pre-bubble consumption returns, reports Jena McGregor for BusinessWeek.

As the third-quarter earnings season closes and the fourth picks up at the start of the year, the truth will be told about the strategies many retailers have used to pick up sales. Some of these tactics include getting creative about managing inventory, adjusting product lines, and dumping an addiction to promotional pricing. (Are retail figures a holiday harbinger?)

Some of the strategies retailers are employing:

• Creating scarcity: Some stores are holding back up to 60% of their inventory to avoid pileups on shelves. As a result, deep discounting won’t be necessary to move products.
• Kicking the discount: Price cuts have become more of a given in order to keep consumers coming back. Promotions are more specialized and big sales and discounts are becoming less common.
• Simple one-stop shopping: Having the right array of products is critical in a world where gaining market share is critical to growth. Chains are moving into new product areas to appeal to more consumers and make operations more efficient.
• Being contrary: Some retailers have taken to expanding and pushing forward rather than pulling back. The reward for some is higher margins and interaction with daily consumers.

A fresh approach may be all that it takes to get some retailers moving again.

For more stories about retail, visit our retail category.

Related ETFs:

• iShares Dow Jones U.S. Consumer Goods Index (NYSEArca: IYK): up 20.1% year-to-date

• SPDR S&P Retail (NYSEArca: XRT): up 81.4% year-to-date

• Consumer Discretionary Select Sector SPDR (NYSEArca: XLY): up 34.5% year-to-date

Why analysts predicted a 1% decline, sales actually rose 0.6%. Discounts and bargains have helped lure the shy-to-spend consumer, reports Rachel Dodes for The Wall Street Journal.

Ultimately, September sales numbers monitored stores open for at least one year, and this report is a key measure of retailer’s health and consumer spending. Will the positive numbers translate into a merry holiday season for retailers? Yes and no.

Retailers are predicting that they’ll see a 1% drop in sales over the holidays. But this is also an improvement over last year’s dismal showing, when sales dropped 3.4%, the Associated Press reports. Consumer confidence is higher than it was a year ago, and shoppers may be more willing to spend.

• SPDR S&P Retail (NYSEArca: XRT): up 71.1% year-to-date

• Consumer Discretionary Select Sector SPDR (NYSEArca: XLY) up 28.5% year-to-date

• Claymore/Robb Report Global Luxury (NYSEArca: ROB) up 42.6% year-to-date

For more stories about retail, visit our retail category.

September retail sales rose 0.6%, better than what analysts had expected. Retailers have been hurting for more than a year now as consumers have increasingly tightened the grip on their wallets, reports Kevin Kingsbury for The Wall Street Journal. Despite the increase, the bad news is that retail sales are at 2005 levels. SPDR S&P Retail (NYSEArca: XRT) is up more than 2% this morning. (Read more about the retail sector here).

Alcoa (NYSE: AA) notched a surprise profit after the market closed yesterday through a combination of cost-cutting steps and higher aluminum prices, reports Reuters. The report comes after three straight quarterly losses. Wall Street had expected another loss. iShares Dow Jones U.S. Basic Materials (NYSEArca: IYM) is up nearly 3% this morning. Alcoa is 3.7%.

The number of newly laid-off workers filing for unemployment has dropped to the lowest number since the  start of this year. It’s the fourth drop in new claims in five weeks, and is being taken as a sign that some healing in the job market is still taking place.

The European Central Bank and the Bank of England both opted to keep their interest rates unchanged, leaving them at record lows of 1% and 0.5%, respectively, report George Frey and Robert Barr for the Associated Press. While the eurozone’s two largest economies – France and Germany – are technically out of a recession, authorities want to keep growth moving in the right direction. The iShares MSCI EMU (NYSEArca: EZU) is up more than 2% this morning. You can read more about Europe’s recovery efforts here.

August wholesale inventories declined for a record 12th straight month in August. This indicates that companies are shrinking orders to factories. But more encouraging is that sales at the wholesale level rose by the largest amount in 14 months, reports Martin Crutsinger for the Associated Press.

Traditionally, the retail sector has its best month at the end of year, when everyone is out spending their hard-earned cash on Christmas gifts, but this year things may be a bit different.  The reason behind this is high unemployment rates, restricted credit availability, foreclosures and record levels of savings, states Mike Duff on bNet.

On the other hand, a desire to spend may rally somewhat if gas prices remain stable, home values continue to strengthen and the stock market’s comeback persists enabling retailers to avoid another negative season.

At the end of the day, only time will tell us what happens to the sector that is so dependent on the Christmas season.

• Retail HOLDRs (NYSEArce: RTH)

• SPDR S&P Retail (NYSEArca: XRT)

For more stories on retail, visit our retail category.

Kevin Grewal contributed to this article.

The Federal Reserve is meeting today and assessing the overall health of the economy to determine whether they will keep interest rates at a record low of close to 0%.  Additionally, investors are hoping to get some indication as to when the Fed plans on hiking rates.

The Commerce Department reported that retail sales climbed 2.7% last month, outperforming the 2% expected by analysts.  To decipher this a bit more, retail sales excluding automobiles, which got a huge jump from the “cash for clunkers” program, rose by 1.1% topping the 0.4% forecast, reports Christopher S. Rugaber for the Associated Press.

These overall jumps were despite the worse-than-expected earnings report released by consumer electronic outfit Best Buy (NYSE: BBY).  Profits for the second quarter were $0.37/share compared to the $0.42/share predicted by analysts.  The good news was that Best Buy stated that customer traffic is stabilizing. Business inventories also rose for the 12th consecutive month in July, which means that companies could soon start to increase orders.

The news didn’t have much effect on the SPDR S&P Retail (NYSEArca: XRT) which was down 0.06% in morning trading.

In further news, the Labor Department announced that wholesale prices rose by 1.7% in August, much higher than the 0.8% predicted by analysts.  Excluding energy and food costs, core inflation rose by 0.2%, while energy prices were up 8% and food costs edged up 0.4%.  Traditionally, these increases are signs of inflation, but with unemployment rates at elevated levels and a weak labor market, inflationary pressures could be under control.

To further support the notion that the economy is recovering, manufacturing in the New York region grew in September at the fastest pace in two years.  The Federal Reserve Bank of New York’s general economic index rose to 18.9 from a 12.1 in the previous month.  Looser credit markets, increases in business spending and a stabilizing economy are all pushing manufacturing up.

Overall, the Dow Jones Industrial Average was down 0.2%, the S&P 500 dropped 0.1% and the Nasdaq added 0.2% in morning trading.

For more stories on manufacturing, visit our manufacturing category.

Kevin Grewal contributed to this article.

The International Council of Shopping Centers and Goldman Sachs reported that sales at established stores fell 2.1% in August from a year ago, beating analysts’ expectations of a drop of 3.5% to 4%. It still indicates that consumers are holding onto their wallets.  Nearly half of the retailers reporting beat expectations, while the other half nearly missed them.  Those that outperformed were primarily discount retailers.  The news sent the SPDR S&P Retail (XRT) up 1.7% in morning trading.

On the employment front, the Labor Department reported that new jobless claims dipped less than expected.  The number of unemployed workers applying for unemployment benefits dropped to 570,000 last week from a revised 574,000 the week before, but higher than the 560,000 forecast by economists.  Additionally, the total number of Americans receiving unemployment benefits jumped to 6.23 million.

In other news, the U.S. service sector gained some ground as the Institute of Supply Chain Management said its service index rose to a 48.4 from a 46.4 in July.  While it was the best reading in 11 months and beat analysts’ expectations, it still indicates the sector is shrinking.

In commodities news, gold climbed to a three-month high as the U.S. dollar weakened and investors grew a bit more uncertain of where the equity markets are going.  The precious metal rose to $982.50/ounce in the London markets and further pushed the SPDR Gold Trust (GLD) up 1% in morning trading.

By late morning, all three major U.S. indexes were in positive territory as the Dow Jones Industrial Average gained 0.2%, the S&P 500 added 0.3% and the Nasdaq jumped 0.2%.

For more stories on gold, visit our gold category.

Kevin Grewal contributed to this article.