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Retail sales gain sends US stocks slightly higher

PALLAVI GOGOI, AP Business Writer

NEW YORK (AP) — Stocks edged higher Tuesday after a surprise gain in retail sales in July provided more evidence that American shoppers are still spending even as their counterparts in Europe and Asia slow down.

The Dow Jones industrial average rose 17 points to 13,186 as of 2:15 p.m. The broader S&P 500 index added two points at 1,406 and the Nasdaq composite index rose less than a point to 3023.

U.S. retail sales rose in July by the largest amount in five months as Americans spent more on cars, furniture and clothes. The gain, which was better than analysts were expecting, suggested that the U.S. economy was strengthening.

Investors sold low-risk assets, sending the yield on the benchmark 10-year Treasury note up to 1.72 percent from 1.66 percent late Monday.

The stock market's gains were held in check by reports that U.S. companies barely increased their inventories in June and that sales fell by the largest amount in more than three years. The slower restocking trend could act as a drag on overall economic growth. When businesses place fewer orders, factory production slows.

"The data points to the fact that the economy is stabilizing at a lower level," said Peter Cardillo, chief market economist at investment bank Rockwell Global Capital. "While the economy isn't slipping further, it leaves open the possibility of the Fed's support for the economy to grow at a better rate."

Many economists believe the Federal Reserve will try to stimulate the economy by launching another program of buying government bonds and mortgage-backed securities to keep interest rates low. They will be closely watching Fed Chairman Ben Bernanke's speech on Aug. 31 at an annual economic conference in Jackson Hole, Wyo.

Home Depot jumped $2.07 to $54.89. The world's biggest home-improvement retailer posted a 12 percent jump in net income and increased its earnings forecast for the entire year. Home Depot's fortunes are closely tied to the housing market, which has been improving. On Thursday, the Department of Commerce releases the housing starts and building permits report for July.

Among other stocks making big moves:

— Groupon plummeted 27 percent. The online coupon company's stock fell to an all-time low of $5.52, down $2.03 after its sales growth fell short of expectations partly due to worsening conditions in Europe.

— Estee Lauder rose $5.34 to $60.35. The beauty company, whose brands include MAC and Aveda, reported results that topped Wall Street expectations. The company also raised its revenue forecast for the year.

— NCR Corp. fell 10 percent following allegations that the ATM maker has violated sanctions and a federal corruption law by operating a subsidiary in Syria and working with blacklisted banks in the country. NCR's stock was off $2.61 at $22.54.

Copyright 2012 The Associated Press.