Nov. 15, 2010, 10:32 a.m. EST
By Donna Kardos
NEW YORK (MarketWatch) — U.S. stocks rose Monday following better-than-expected retail sales, although the gains were limited by disappointing manufacturing data and a rise in inventories that investors fear might have been too big.
The Dow Jones Industrial Average climbed 49 points, or 0.4% to 11241, in early trading. Caterpillar was among the measure’s best performers with a 1.1% increase after the heavy-equipment giant said it will buy mining company Bucyrus International for about $7.6 billion. Under the agreement, Caterpillar will pay $92 for each Bucyrus share, a 32% premium to Friday’s closing price. Shares of Bucyrus, which is not a Dow stock, surged 29% to $89.74.
The Nasdaq Composite edged up 0.2% to 2523. The Standard & Poor’s 500 index added 0.4% to 1203.
The advance came as data showed U.S. retail sales surged in October, topping expectations on robust car sales and solid spending for a broad array of merchandise going into the holiday shopping season. Retail sales rose 1.2% last month, the biggest rise since March and larger than the 0.8% increase that was expected.
However, excluding autos, all other retail sales rose 0.4%, just shy of the 0.5% gain that was expected.
Also keeping Monday’s climb in check, the November reading of New York-area manufacturing activity from the New York Fed came in at negative 11.14, down from 15.73 in October and below economists’ expectations for a reading of 13.00. Measures of new orders, employment and prices received all fell.
Together, the data reflect that “growth is anemic,” said Adam Sarhan, chief executive of Sarhan Capital. “In general the economy’s still recovering but it’s limping along. It’s not a robust recovery.”
The anemic growth had investors fretting that a bigger-than-expected rise in inventories at U.S. businesses in September could leave companies holding too much inventory if the holiday-shopping season disappoints. Inventories increased 0.9% from the prior month to a seasonally adjusted $1.403 trillion, above the 0.6% increase economists had expected. August inventories also rose 0.9%, revised up from a 0.6% increase.
Overseas, worries persisted over the debt situation in euro zone countries including Ireland and Greece. Europe’s debt crisis has entered a critical new phase as Ireland resisted pressure from the European Central Bank and national governments to seek a bailout amid growing concern that the currency bloc could unravel.
Ireland fiercely denied that it was in bailout talks, and European officials publicly insisted Dublin was under no pressure to seek help. Meanwhile, the Greek government vowed to press ahead with tough fiscal reforms despite an upward revision in its 2009 deficit by the European Union’s statistics agency, Eurostat.
“The bigger concerns are still looming,” Sarhan said, noting that investors’ key concerns remain “the health of the global recovery, the debt concerns out of Europe, and what the dollar is doing in relation to the currency wars.”
Following criticism from Germany and China last week, the Federal Reserve’s latest attempt to boost the U.S. economy is now coming under fire from Republican economists and politicians. A group of prominent Republican-leaning economists, coordinating with Republican lawmakers and political strategists, is launching a campaign this week calling on Fed Chairman Ben Bernanke to drop his plan to buy $600 billion in additional U.S. Treasury bonds.
The dollar climbed even as stocks rose, deviating from their usual inverse relationship. The U.S. Dollar Index, tracking the U.S. currency against a basket of six others, climbed 0.5%.
Treasurys fell slightly, lifting the yield on the 10-year note to 2.84%. Crude-oil futures rose above $85 a barrel while gold futures edged higher.
Among stocks in focus, BHP Billiton abandoned its US$39 billion bid for Canadian fertilizer company Potash Corp. of Saskatchewan, raising questions about the growth prospects of the world’s biggest miner amid increasing resistance from governments and global regulators to major takeovers. BHP rose 1.1% while Potash fell 1.4%.
Lowe’s said its fiscal third-quarter earnings rose 17% as revenue and margins improved, though sales were lower than expected. Its shares climbed 1.7% even as the home-improvement retailer lowered its earnings forecast for the year.