U.S. Stock, Bonds Drop on Retail Sales Report; Dollar Gains

BY

U.S. stocks fell, ending their first losing week in a month, after a surge in retail sales suggested the Federal Reserve will resume raising interest rates.

Retail sales rose 1.4 percent last month, the fastest pace since January, a government report said. The data indicated the economy may not be decelerating as much as the Fed expected when it held rates steady this week after two years of increases.

The Dow slid 36.34, or 0.3 percent, to 11,088.03. The Standard & Poor's 500 Index lost 5.07, or 0.4 percent, to 1266.74. The Nasdaq Composite Index slipped 14.03, or 0.7 percent, to 2057.71.

U.S. Treasury 10-year notes posted their first weekly loss since June after the retail sales report spurred speculation the Federal Reserve may increase borrowing costs again this year.

The dollar reached a two-week high against the yen and the euro after the government report showed U.S. retail sales increased last month by more than economists forecast.

The statistics helped the dollar by bolstering speculation the Federal Reserve will lift interest rates again. The central bank this week left its target overnight lending rate unchanged at 5.25 percent, ending a run of 17 straight increases since June 2004.

Crude oil rose on speculation that terrorist threats won't slow the economy or curb air travel as much as expected yesterday, when a plot to bomb aircraft heading for the U.S. was discovered.

[ Last edited by BY on 2006-8-12 at 09:40 PM ]