Dawn Chorus: US stocks close flat as financials offset retail gains

US stocks closed little changed on Tuesday even though better than expected retail sales and business inventories data fed optimism that the economic recovery was slowly proceeding.

The Dow Jones industrial average dropped 18 points, or 0.17%, to 10,526. The S&P 500-stock index fell one point, or 0.07%, to 1,121. The Nasdaq composite index gained four points, or 0.18%, to 2,290.

Retailers were a bright spot after data showed US retail sales rose 0.4% in August – largest gain in five months. Positive earnings results from retailers Best Buy and Kroger validated the government figures. Best Buy jumped 6% and Kroger rose 1.1%. The S&P Retail index rose 1.2%. JC Penney gained 7.4% and department store Macy’s added 2.9%.

A separate release said that business inventories rose by 1% in July, the largest jump for two years and twice the 0.5% increased projected.

The technology sector gained in response to Microsoft’s plans to issue debt to fund dividends and possible share buy-backs. Cisco climbed 0.9%, with Hewlett-Packard advancing 2.6%.

In contrast, financial stocks fell amid concern that Bank of America may have to buy back $20 billion in home loans.  BofA dropped 1.9%, while JPMorgan Chase slipped 1%.

European shares also closed flat on Tuesday as encouraging US retail sales offset a selloff in utilities and a plunge in German investor confidence. The Stoxx Europe 600 Index slipped less than 0.1% to 266. The UK’s FTSE 100 rose 0.1%, while Germany’s DAX and France’s CAC 40 gained 0.2%.

In current trading, most Asian shares rose, led by gains in Japan after the country intervened to weaken its currency for the first time since 2004.

The MSCI Asia Pacific Index rose 0.3% to 125 as of 11:03 a.m. in Tokyo. The Nikkei 225 Index was up 1.65% at 9,453. Hong Kong’s Hang Seng was trading 0.6% higher at 21,820. Shanghai Composite in China fell 0.34% to 2,679.