By Corrie Driebusch
U.S. stocks rallied on Thursday after data showed that retail
sales posted the biggest jump in eight months in November.
The Dow Jones Industrial Average climbed 206 points, or 1.2%, to
17739. The S&P 500 added 27 points, or 1.3%, to 2053 and the
Nasdaq Composite rose 71 points, or 1.5%, to 4755.
Stocks were buoyed by data showing Americans increased their
shopping last month. U.S. retail sales rose a seasonally adjusted
0.7% in November from a month earlier. Economists surveyed by The
Wall Street Journal had predicted overall sales to rise 0.4%. A
decline in the number of Americans filing for first-time jobless
benefits last week also cheered investors, who said they viewed the
decrease as a sign that the labor market continues to improve.
Thursday's rally marked a reversal from the previous session's
selloff that saw the Dow industrials post their biggest one-day
loss in two months, as oil prices tumbled to fresh five-year lows.
The decline in oil prices leaves American consumers with more money
in their pockets, potentially providing a boost to the U.S.
economy, which already has seen robust job growth this year.
However, falling crude prices stand to cut into profits of energy
companies, particularly those whose revenues rely heavily on U.S.
shale oil, and this has led to steep declines in energy
companies.
Consumer discretionary shares rallied on the positive retail
sales data, with the sector up 1.6%.
"Today the market is being completely influenced by
stronger-than-expected retail sales and lower-than-expected jobless
claims," said Kent Engelke, chief economic strategist of Capitol
Securities Management Inc., which manages just under $5
billion.
The data support the narrative that the U.S. economy is
improving and come as stocks were ready to rebound after getting
"beaten up" the day before, he said.
Thursday's gains come after sharp declines for both the price of
oil and U.S. stocks, with the benchmark U.S. oil price down nearly
8% so far this week and the S&P 500 off 2.4% as of Wednesday's
close.
On Wednesday, the benchmark U.S. oil price tumbled 4.5% to
$60.94 a barrel, with investors blaming the downturn on an
unexpected jump in domestic oil stockpiles. The sharp decline in
the price of oil weighed on shares of U.S. energy producers, and
energy was the worst performing sector in the S&P 500. The
price of crude is down 38% year to date.
On Thursday, U.S. oil futures were little changed at $60.87 a
barrel on the New York Mercantile Exchange.
"Oil doesn't seem to be falling that much today, and that's
helping energy stocks," said Jason Weisberg, managing director at
Seaport Securities Corp.
Shares of energy companies in the S&P 500 were up 1.8%.
Energy is the best performing sector in the Dow industrials, with
Exxon Mobil Corp. trading up 2.6%. Exxon shares are still off more
than 10% year-to-date.
Investors also noted that the positive economic data released
Thursday likely benefited from the lower cost of oil, and the
benefits should continue to reverberate throughout the U.S.
economy.
"In essence a decline in prices at the pump represents an
increase in consumers' discretionary take-home pay, and it
shouldn't be surprising that you should start seeing stronger
retail sales," said Burns McKinney, portfolio manager at NFJ
Investment Group, which manages about $41 billion.
"Where you should see it the most is Wal-Mart or Costco where
sales are competing for the incremental or marginal dollar to a
greater degree than some of the luxury retailers."
Shares of Wal-Mart Stores Inc. rose 1.5% and those of Costco
Wholesale Corp. gained 0.8%.
European stocks were unchanged, with the Stoxx Europe 600 down a
fraction of a point.
The yield on the 10-year Treasury note rose to 2.209% from
2.169% on Wednesday. Yields rise as prices fall.
In corporate news, shares of Staples Inc. jumped 9.1% after
Starboard Value LP disclosed in filings that it has built a roughly
6% stake in the company. The activist investor also boosted its
position in Office Depot Inc. to about 10%. Shares of Office Depot
rose 14%.
RadioShack Corp. on Thursday outlined a $400 million
cost-cutting plan it hopes will stanch a hemorrhage of cash, as the
struggling electronics chain tries to get through the holiday
season in good enough shape to trigger a rescue plan from its
lenders. Shares fell 5.5%.
Shares of Lending Club Corp. opened at $24.75 in their trading
debut Thursday, well above their initial public offering price of
$15, and valuing the company at nearly $9 billion. Shares are
currently up 54%.
Write to Corrie Driebusch at corrie.driebusch@wsj.com
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