Shoppers help Wall Street

NEW YORK — Consumers are getting more confident about the economy, and Wall Street is tagging along with them.

Stocks surged Tuesday, posting their first big win in a week after a research group said consumer sentiment rose in May to the highest level recorded since September. Major stock indicators jumped more than 2 percent, including the Dow Jones industrial average, which added 196 points.

The day’s gains nudged the Standard & Poor’s 500 index back into the plus column for the year and leaves the Nasdaq composite index up 11 percent in 2009. The Dow is still down 3.5 percent.

Investors started buying enthusiastically after the Conference Board’s Consumer Confidence Index vaulted to 54.9 from 40.8, soaring past the 42.3 that economists surveyed by Thomson Reuters forecast.

Wall Street has been watching the index for signs of whether consumers might start shopping more or buy big-ticket items like cars and homes.

Consumer spendingmakes up more than two-thirds of U.S. economic activity, making their confidence critical for the U.S. to pull out of recession.

"The consumer confidence figure is one that no one really pinned a lot of hopes on as going higher,” said Jim King, chief investment officer at National Penn Investors Trust Co.

With unemployment still high and expected to go higher, many market watchers thought the mood on Main Street would remain gloomy.

Traders saw green on their screens on the first day back from a long weekend, but the compressed week still could trip up the market.

The Dow rose 196.17, or 2.4 percent, to 8,473.49. The S&P 500 index rose 23.33, or 2.6 percent, to 910.33, and the Nasdaq rose 58.42, or 3.5 percent, to 1,750.43.

Analysts said the day’s gains reveal just how jumpy the market still is and warned that it could show a similar quick reaction to bad news.

The Conference Board’s report marked the second consecutive month of large gains in its measure of consumer confidence.


by the associated press

Upscale brands suffer losses

Department store Macy’s Inc. and clothing maker Liz Claiborne reported wider losses for the first quarter Wednesday because of charges tied to changes they are making as they try to streamline and respond to how people are shopping in the recession.

Though both companies said business isn’t getting worse, their CEOs acknowledged that spending is likely to remain weak throughout the year. The financial results came as the Commerce Department said retail sales fell for a second straight month in April, raising new concerns about consumers’ willingness to spend even after some hopeful signs.

A significant rebound in spending is integral for ending the recession. The Commerce Department said retail sales fell 0.4 percent last month, much worse than the flat reading economists expected. That followed a 1.3 percent drop in March that was worse than first estimated.

Demand at department stores and general merchandise stores fell 0.1 percent and sales at specialty clothing stores dropped 0.5 percent. Macy’s posted a loss of $88 million, or 21 cents per share, for the period ended May 2. That compares with a loss of $59 million, or 14 cents per share, a year earlier.


Liz Claiborne, a supplier to department stores such as Macy’s, posted a loss of $91.4 million, or 97 cents per share, in the first quarter. That compares with a loss of $31 million, or 33 cents per share, a year ago.

by the associated press

Retail sales dip

WASHINGTON (AP) — Retail sales fell in April for a second straight month, dashing hopes that consumer spending was starting to revive and would help end the recession.

Economists said families who are worried about layoffs and unpaid job furloughs are saving more and spending less, delaying the start of a sustained recovery.

The disappointing report helped send stocks down on Wall Street, where the Dow Jones industrial average slid 184 points — more than 2 percent. Other major indexes fell even more sharply.

Retail sales fell 0.4 percent last month, worse than the flat performance many economists had expected, the Commerce Department reported Wednesday.

Retail sales had posted gains in January and February after falling for six straight months. The gains had raised hopes that the crucial consumer sector of the economy might be stabilizing. But the setbacks in March and April retail sales cast doubts on that prospect.

"People are obviously still very nervous and not spending," said David Wyss, chief economist at Standard & Poor's in New York. "The economy is still in a recession, and I don't think we will hit bottom until late summer or early fall."

Analysts said the economy should benefit in coming months from the tax relief included in the $787 billion stimulus plan Congress passed in February. But the extra $17 a week that the average family will receive won't translate into a major boost in spending.

Such modest relief is hardly enough to negate the effects of layoffs and employee furloughs, shrunken retirement accounts and home equity, and consumers struggling to boost savings because of fears about the future.

Mary Goodman has stopped most of her extraneous spending — like meals out. She reined in her spending habits after March 1, when she was laid off from her job as an office manager at an online job posting company in Milwaukee.

Now the 60-year-old Goodman eats out just once a week with a former co-worker, a trip that included soup at an indoor market on Wednesday afternoon.

"I'm not doing any clothes shopping," she said. "I'm not tempting myself by going into the mall."

Anecdotal evidence had signaled some improvement in sales in recent weeks. But "to offset the plunge in wealth, the household saving rate still needs to double from the current rate of 4 percent," Paul Dales, U.S. economist with Capital Economics in Toronto, wrote in a research note.

"With falling employment hitting incomes, this can only be achieved by a further retrenchment in spending."

The savings rate, which was hovering around zero a year ago, has climbed to just above 4 percent. Many economists think it will hit 6 percent or more this year as workers anxious about layoffs and depleted investments put away their credit cards. The jobless rate rose to a 25-year high of 8.9 percent in April, with a net total of 539,000 jobs lost during the month.

The fall in retail sales in April came even though car sales posted a 0.2 percent increase. Excluding autos, the drop in retail sales would have been 0.5 percent — much worse than the 0.2 percent gain economists had expected.

Sales other than autos showed widespread weakness last month. Demand at department stores and general merchandise stores fell 0.1 percent. Sales at specialty clothing stores dropped 0.5 percent.

Sales also fell in April at furniture stores, electronic and appliance stores, food and beverage stores and gasoline stations, the Commerce Department said.

The sales drop at department stores and specialty clothing stores came as a surprise since the nation's big chain stores had reported better-than-expected results for April. Same-store sales rose 0.7 percent last month compared with April 2008. It was the first overall increase in six months, according to the tally by Goldman Sachs and the International Council of Shopping Centers.

The two reports aren't comparable, analysts noted. The government figures, for example, cover more stores and are adjusted for seasonal variations.

Analysts said one reason the consensus forecast may have been too optimistic is that with many stores closing, it's been difficult to estimate industry figures accurately.

Department store operator Macy's Inc. on Wednesday reported a wider loss for the first quarter, due partly to restructuring charges. Still, the company expects to see an improvement in sales from its localization efforts beginning in the fourth quarter of 2009, and in the spring of 2010.

Liz Claiborne Inc. also reported a first-quarter loss that was worse than Wall Street expected. The apparel maker said its quarterly loss swelled on restructuring charges and a drop in same-store sales stemming from lower consumer spending and an extra week of sales in the year-ago period.

In a separate report, the Commerce Department said business inventories fell 1 percent in March, a seventh straight decrease. That's the longest stretch since businesses cut inventories for 15 straight months in 2001 and 2002, during the last recession.

Businesses are cutting stockpiles amid declining sales, a development that has intensified the current downturn. Still, the reductions in stockpiles eventually should help businesses get their inventories more in line with reduced sales. If that occurs, any strengthening in consumer demand should lead to increased production.

Consumer spending grew 2.2 percent in the first quarter of the year, after posting back-to-back quarterly declines in the last half of 2008.

Economists think the overall economy, as measured by the gross domestic product, will show a decline of around 3 percent in the current quarter. That would compare with steep declines of more than 6 percent each in prior two quarters, the worst six-month performance in a half-century.

"The weak start to second quarter consumer spending is a potent reminder that that the recession is not over, despite signs of green shoots," said Stuart Hoffman, chief economist at PNC Financial.

Goodman needs no such reminder. Despite her reduced spending, she said her son likely will have to move home from college because she can't pay his rent.

AP Retail Writer Emily Fredrix in Milwaukee contributed to this report.


by the associated press