RTRS: US STOCKS-Wal-Mart, spending woes to drag market at open
U.S. stocks headed for a lower open on Thursday after Wal-Mart Stores Inc (WMT.N) posted disappointing December sales and cut its fourth-quarter profit outlook, compounding investors' concerns about the worsening recession.
Shares of Dow component Wal-Mart, the world's largest retailer, slid 8 percent to $51.15 before the bell. For details see [ID:nWNAB7881].
The news pointed to further contraction in consumer spending since analysts had hoped cut-price retailers like Wal-Mart would fare better as cash-strapped consumers seek to stretch their dollars amid rising unemployment.
"It's been clear since late last year that the consumer is becoming more frugal," said Subodh Kumar, chief investment strategist at Subodh Kumar & Associates in Toronto. "There's no one-to-one shift, it's not as if all the money they were spending at stores is being spent at discount stores now."
S&P 500 futures SPc1 shed 7.6 points, and were below fair value, a formula that evaluates pricing by taking into account interest rates, dividends and time to expiration on the contract. Dow Jones industrial average futures DJc1 fell 82 points while Nasdaq 100 NDc1 futures fell 7.25 points.
A weekly government report showing an unexpected fall in new claims for unemployment benefits helped futures cut some of their losses but the retail gloom offset the boost from that.
Limited Brands (LTD.N) was another disappointment. The parent of lingerie chain Victoria's Secret posted an unexpectedly big 10 percent slide in December sales at stores open at least 12 months and forecast fourth-quarter profit below analysts' estimates.
On the economic front, investors await President-elect Barack Obama's speech on the economy at 11 a.m. (1600 GMT).
With Thursday marking the market's 5th session of the new year, a down day would fuel anxiety about its ability to push ahead with a recovery from its Nov. 21 bear market low.
According to the Stock Trader's Almanac January's first five days act as an "early warning" on the year's prospects.
Disappointing outlooks from Alcoa Inc (AA.N) and Intel Corp (INTC.O) and signs of mounting job losses on Wednesday sent U.S. stocks to their worst tumble in more than a month and the Dow industrial average .DJI erased its gain for the year.
