Markets Start Red on Wal-Mart

Stocks took another hit on Thursday as the markets opened in the red on Wal-Mart's surprisingly weak same-store sales, which overshadowed a better-than-expected labor report.

Stocks took another hit on Thursday as the markets opened in the red on Wal-Mart's surprisingly weak same-store sales, which overshadowed a better-than-expected labor report. 

Today's Market

As of 9:31 a.m. EDT, the Dow Jones Industrial Average lost 55.83 points, or 0.62%, to 8714.99, the S&P 500 fell 3.71 points, or 0.41%, to 902.94 and the Nasdaq Composite slid 6.09 points, or 0.38%, to 1592.97. The consumer-friendly FOX 50 dropped 0.36 points, or 0.05%, to 687.09.

The early losses only add to Wednesday's 245-point plunge that wiped out all 2009 gains on the Dow. In fact, the markets have closed in negative territory two of the past three sessions.

Aside from the labor and retail-sales data, the markets will be focused President-elect Barack Obama's economic speech, where he will make his case for an aggressive economic stimulus package that could top $800 billion. Obama's big spending plans have drawn increasing skepticism as the Congressional Budget Office predicted the budget deficit will triple to a record $1.2 trillion in 2009. 

"I don't believe it's too late to change course, but it will be if we don't take dramatic action as soon as possible. If nothing is done, this recession could linger for years. The unemployment rate could reach double digits," Obama will say, according to excerpts of his speech. "In short, a bad situation could become dramatically worse."

In a sign that even discount retailers are struggling during this year-long recession, Wal-Mart (WMT) cut its fourth-quarter guidance and revealed its same-store sales rose 1.7% excluding fuel, widely missing estimates for a 2.8% rise. Throughout this downturn, the retail king has benefited from increasingly cost-conscious customers by outperforming its peers. 

The numbers were much worse for mainstream retailers as Limited Brands (LTD) posted a 10% drop in same-store sales and lowered its guidance for the current quarter below estimate and retailer J Crew (JCG) said same-store sales declined in the mid-teen range and slashed its fourth-quarter and full-year outlook. Also, Macy's (M) said its same-store sales slumped 7.5%, forcing the company to cut its guidance and unveil plans to close 11 stores. 

However, there were some bright stops as Target's (TGT) same-store sales results widely beat the Street, Aeropostale (ARO) boosted its fourth-quarter guidance and J.C. Penney (JCP) exceeded expectations. 

Labor Data in Focus

The markets received a rare positive economic report Thursday morning as the Labor Department said initial jobless claims unexpectedly declined for the second consecutive time last week to the lowest level in almost three months. The government said claims fell 24,000 to 467,000 last week, widely beating expectations for claims to surge by 63,000. 

"It would be a mistake to view the drop in initial claims filings as a sign of an improving labor market as it was likely affected more by the calendar than the calculator," said Mark Lieberman, FOX Business senior economist, pointing to a second consecutive holiday-shortened week. 

Continuing claims, those filed by workers out of work for more than one week, soared by 101,000 to 4.61 million, a level unseen since November 1982. The latest labor figures come a day after ADP predicted the U.S. lost nearly 700,000 private-sector jobs, a report that clearly spooked the markets.

With those reports out of the way, the markets will zero in on Friday's crucial monthly jobs report, which economists say could show the U.S. lost nearly 500,000 jobs last month, bringing the unemployment rate to 7%. It's possible the prospect of the jobs report will weigh heavily on the markets on Thursday as the S&P 500 has dropped an average of 3.02% in the day preceding the last six jobs reports, according to Schaeffer's Investment Research. 

Meanwhile, crude oil futures built on Wednesday's historic selloff, the worst one-day percentage drop for the commodity since September 2001. The price of a barrel of crude was down 13 cents to $42.30 in recent trading. The energy market was still reeling from a massive and unexpected surge in crude stockpiles announced a day ago. Crude was also under pressure from the slumping equity markets. 

Corporate Movers

Yahoo! (YHOO) saw its shares sink after Microsoft (MSFT) CEO Steve Ballmer told FOX Business the failed takeover of Yahoo! is "a thing of the past," casting doubt on hopes the two tech giants would renew merger talks. "You certainly shouldn't think we'll go back after Yahoo...We may try to do other kinds of partnerships with them, but acquisition is a thing of the past," said Ballmer. 

TD Ameritrade (AMTD) unveiled a $606 million stock and cash deal to expand its online brokerage by acquiring thinkorswim (SWIM). The deal represents a 54.1% premium on thinkorswim's closing price on Wednesday. 

Citigroup (C) is leading other lenders in advanced talks with senators over legislation that would let judges set repayment terms for millions of mortgage holders in bankruptcy court, The Wall Street Journal reported. Citi hasn't made a final decision to support the "cramdown" legislation, which Wall Street has previously fought to avoid. 

Microsoft (MSFT) dealt a blow to rival Google (GOOG) by unveiling a deal to provide Internet search services for cell phones of Verizon Wireless, which is a joint venture of Verizon (VZ) and Vodafone (VOD). 

Target (TGT) said same-store sales fell 4.1% in December, widely beating expectations for a 9.1% drop. 

Aeropostale (ARO) posted a 12% jump in December same-store sales and boosted its fourth-quarter earnings outlook above the Street's view, sending its shares sharply higher. 

Nordstrom (JWN) warned it won't meet its prior fourth-quarter forecast and said its same-store sales fell by a better-than-expected 10.6% in December. 

J.C. Penney (JCP) disclosed same-store sales declined by 8.1% last month, topping estimates for sales to fall 10.3%. 

Saks (SKS) showed even luxury retailers have been hurt by the recession as it said same-store sales plunged by a worse-than-expected 19.8% in December. The retailer also said it sees a significant rise its gross margin rate for the fourth quarter from a year ago. 

Walgreen (WAG) released plans to slash 1,000 jobs and offer early retirement and severance to some workers, resulting in costs of up to $400 million over the next two fiscal years. 

Global Markets

The ripple effects of Wednesday's selloff translated to a nasty fall in Asian markets overnight, while European markets also traded lower

The Dow Jones Euro Stoxx 50 Index, which gauges the 50 largest companies in Europe, slumped 1.45% to 2501.72, extending yesterday's losses. In London, where the Bank of England slashed rates to the lowest level in the central bank's 400-year history, the FTSE 100 slipped 1.07% to 4459.18. On the continent, Germany's DAX fell 1.15% to 4880.68 while Paris' CAC 40 dropped 1.48% to 3296.67.

"Some are seeing this as the end of the bear market rally and with a lot of negative data flying around ... It's no real surprise that we've seen this selloff," said Jimmy Yates, a dealer with CMC Markets in London.     

Asia saw heavier losses as Tokyo's Nikkei 225 slumped nearly 4% to 8876 and Hong Kong's Hang Seng extended slid 3.8% to 14415.91. Australia's ASX 200 dropped 2.26%. 

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