Sales and productivity reports send Dow higher

Better-than-expected reports on retail sales and productivity sent US stocks mostly higher today, but gains were limited amid investors’ lingering concerns that prices might still be too high.

The Dow Jones industrial average closed up 64.71, or 0.7%, at 9,126.45.

The broader market finished mixed. The Nasdaq composite index slipped 0.47, or 0.03%, to 1,652.21. The Standard & Poor’s 500 index rose 7.04, or 0.7%, to 974.12.

The Labour Department reported business productivity grew at a surprisingly strong annual rate of 5.7% in the second quarter, the best showing since Autumn 2002. The reading was also an improvement from the 2.1% growth notched in the first quarter of this year.

In a separate report, the department said new jobless claims fell by a seasonally adjusted 3,000 to a six-month low of 390,000 for the work week ending August 2. It was the third week in a row that claims stood below 400,000, a level associated with a tepid job market.

Stocks have been pressured in recent weeks by rising interest rates and investors’ worries that the recent rally might have come too fast. Until investors saw strong evidence of a solid economic recovery, gains would likely be limited, they said.

“The market has been in consolidation,” said Michael Sheldon, chief market strategist at Spencer Clarke LLC. ”Oil prices and bond yields have been rising in recent weeks, and that’s created a bit of profit-taking in the stock market.”

But he added, “Recent signs show the economic data is starting to improve. As long as that continues, chances are the pullback we’ve been experiencing will be somewhat brief and lead to further equity gains in the latter half of the year”.

Retailing stocks advanced today after a string of companies reported July sales which exceeded Wall Street’s expectations, due to warm weather and significant discounting.

Wal-Mart, which reported strong sales and raised its second-quarter earnings forecast, rose 1.26 to 57.

Decliners included consumer lender Americredit, which dropped 1.20 to 6.60, after issuing a 2003 profit warning.

Intel fell 15 cents to 23.99 after the Internal Revenue Service raised the chipmaker’s tax liability by about 600 million following a review of the returns in 1999 and 2000.

Advancing issues outnumbered decliners 4 to 3 on the New York Stock Exchange. Volume was moderate.

The Russell 2000 index, a barometer of smaller company stocks, fell 0.14, or 0.03%, to 453.77.