US retail and tech stocks disappoint

Wall Street stocks had a sluggish day as news of an increase in private sector employment and new factory orders was offset by weakness in technology and retailers.

Traders welcomed strong results from Monsanto (NYSE:MON), the agribusiness, but poor December sales at Ford (NYSE:F) and General Motors (NYSE:GM) weighed on the car sector.

Equities paused after a sharp sell-off the previous day, prompted by soaring commodity prices and a contraction in the manufacturing sector.

However consumer discretionary stocks fell sharply, dragging the economically sensitive sector more than 20 per cent below its previous market peak, the definition of a "bear market".

The S&P 500 rose as much as 0.7 per cent before closing flat at 1,447.16 with a majority of stocks ending the session lower. The Nasdaq Composite fell 0.3 per cent to 2,602.68 while the Dow Jones Industrial Average rose 0.1 per cent to 13,056.72.

The onset of a bear market in the consumer discretionary sector was a worrying signal for investors sensitive to indications of a US economic slowdown. The sector has lost 21.2 per cent of its value since its peak last June.

Although a slump in the homebuilders has contributed to the sector's decline, the inclusion of an array of other well-known US consumer companies on a list of significant fallers suggests a broader malaise.

"It's the retailers, the hoteliers, the casual dining sector - the whole consumer sector is getting smashed right now," said Jay Wong, portfolio manager at Payden & Rygel.

Office Depot has fallen 65 per cent during the period, discount retailer Big Lots has lost 53 per cent, JC Penney, the department store operator, has shed 51 per cent while Marriot International, the hotel chain, is down 29 per cent.

Stocks rose in early trade on Thursday after the Commerce Department said new factory orders increased 1.5 per cent in November, much greater than the expected rise of 0.4 per cent.

But traders remained cautious as the data came only a day after a sharp contraction in the December ISM manufacturing index.

Investors reacted favourably to news that the private sector added 40,000 jobs in December. Although modest, the figure prompted stock futures to rally as some traders had feared the number would be negative.

Weekly jobless claims fell 21,000 to 336,000, below an expected level of 345,000.

US markets remain acutely sensitive to employment news, with many analysts pointing to jobs as the key indicator of whether the US economy will fall into recession. The Labor Department is on Friday due to release keenly awaited data on US non-farm payrolls.

State Street (NYSE:SBZ) on Thursday became the latest financial company to reveal exposure to the troubled US mortgage market. The money manager said it would take a $279m charge for the fourth quarter, but the stock closed 8.2 per cent higher at $85.37 after its 2007 operating profit outlook, which excludes the charge and other costs, beat Wall Street estimates

In the biotechnology sector, Monsanto beat Wall Street estimates after reporting fiscal first quarter net income of $256m, almost treble last year's figure. The group raised its 2008 earnings guidance and the shares rose 8.5 per cent to $120.92.

Celgene (NASDAQ:CELG) gained 7.7 per cent to $49.85 as it passed a regulatory hurdle to the completion of its acquisition of Pharmion.

Sciele Pharma rose 11.4 per cent to $22.10 after it received regulatory approval for four dosage strengths of a drug to treat high blood pressure. Onyx Pharmaceuticals (NASDAQ:ONXX), the top performing US stock in 2007, rose 4 per cent to $57.98. The stock made a return of 425 per cent for investors last year.

The drug retailing sector lagged, after last month's pharmacy same-store sales disappointed analysts. CVS Caremark fell 6.6 per cent to $36.77 and Rite Aid (NYSE:RAD) fell 15.2 per cent to $2.28.

Carmakers were in focus as Toyota overtook Ford to claim the number two position in the US market. Ford's sales of cars and light trucks declined 9.2 per cent in December, while sales at General Motors sales slid 4.4 per cent. The shares fell 2.3 per cent to $6.45 and 2 per cent to $23.92 respectively.

Gold miners were among the best performers as the precious metal held near record highs. Barrick Gold (NYSE:ABX) rose 5.9 per cent to $48.71.