Closing Bell: Stocks End Volatile Session Lower on Weak Retail Earnings

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Richard Drew/AP

Retail stocks helped push U.S. stock markets lower again Friday, a day after the biggest one-day drop in nearly two months, as evidence mounted showing consumers are becoming more cautious. Blue chip stocks had their worst week of the year.

The Dow Jones industrial average (^DJI) lost 30 points, or 0.2 percent to 15,081, the Standard & Poor's 500 index (^GPSC) surrendered 5 points, or 0.3 percent, to 1,655, and the Nasdaq composite index (^IXIC) edged down 3 points to 3,602.

Nordstrom (JWN) became the latest department store chain to post lower-than-expected second-quarter revenue as its same-store sales slipped, prompting it to lower its full-year sales and profit forecast. Shares fell 5 percent to $56.35.

Other retailers have disappointed investors with second-quarter earnings. From Walmart (WMT) and Gap (GPS) to Macy's (M) and McDonald's (MCD), chains that cater to middle- and lower-income Americans are feeling the pinch of an uneven economic recovery.

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The retail industry is a closely watched part of the U.S. economy as consumer spending makes up roughly 70 percent of economic activity. The disappointing outlooks are worrisome because they take into account the back-to-school shopping season, typically the second-biggest shopping period for U.S. retailers.

Adding to the market's concern, a preliminary reading on consumer sentiment for August slipped from July's six-year high, according to a University of Michigan survey.

One bright spot was homebuilding stocks, which rallied after the Commerce Department reported housing starts rose 5.9 percent in July, compared with a 9.9 percent drop in June. Pulte Group and Lennar were among the top percentage gainers in the S&P 500. PulteGroup (PHM) rose 2.4 percent to $16.29 and Lennar (LEN) gained 1.9 to $33.91. But rival D.R. Horton (DHI) fell 0.7 percent.

Airline stocks gained some ground, with U.S. Airways (LCC) shares rising 1.8 percent to $16.01 but the sector is still lower for the week following a lawsuit from the Department of Justice to block the merger of US Airways and American Airlines.

PC-maker Dell (DELL) reported a 72 percent drop in its fiscal second-quarter earnings. That may help convince Dell shareholders to approve the $24.8 billion buyout proposed by founder Michael Dell and private-equity firm Silver Lake Partners. Dell shares rose 11 cents to $13.82 -- still below the proposed buyout price of $13.88 a share.

More Stocks in the News:

  • The Securities and Exchange Commission approved the proposed $8 billion sale of the venerable New York Stock Exchange to the much younger futures exchange, IntercontinentalExchange, or ICE. Shares of NYSE Euronext (NYX) -- parent of the NYSE -- rose 0.6 percent to $42.12, while ICE (ICE) rose 0.8 percent to end Friday trading at $181.83.

  • Green Mountain Coffee Roasters (GMCR) shares rose 3.4 percent to $76.41 after Nasdaq OMX Group (NDAQ) said the company will replace Life Technologies (LIFE) in the Nasdaq 100 index on Aug. 22.

  • Pandora Media (P) shares jumped 2.4 percent to $20.33 following a bullish call on the stock from Goldman Sachs (GS).

  • J.C. Penney (JCP) shares fell 3 percent to $13.41 as the retailer entered into an agreement with former board member and largest shareholder Bill Ackman, paving the way for him to sell his stake.

  • Shares of Applied Materials (AMAT) rose 1.9 percent to $15.62, even though the chip-making equipment company's earnings and outlook fell short of Wall Street estimates as analysts focused on its long-term outlook.

What to Watch Monday:

  • Urban Outfitters (URBN) reports corporate quarterly earnings.

-Compiled from staff and wire reports.