US stocks up narrowly

US stocks finished a lacklustre session slightly higher today as many investors opted to keep to the sidelines after a disappointing report on retail sales and another increase in oil prices.

With Hurricane Ivan threatening oil rigs in the Gulf of Mexico, crude futures moved higher for the second straight day. A barrel of light crude settled at $44.39, up 52 cents, on the New York Mercantile Exchange.

Sluggish car sales resulted in a 0.3% drop in retail sales for August, worse than the 0.1% economists had expected.

However, when car sales were removed from the equation, sales were actually up slightly for the month – though not enough to completely assuage Wall Street’s concerns or encourage most investors to make new buys.

“People are very hesitant to make mistakes. To make a commitment right now, it’s like being in a life raft out in the middle of the ocean by yourself,” said Michael Murphy, head trader at Wachovia Securities in Baltimore.

“Until we get some good news, it’s just going to be like this. People looking for reasons not to buy stocks.”

The Dow Jones industrial average was up 3.40, or 0.03%, at 10,318.16.

Broader stock indicators were also narrowly higher. The Standard & Poor’s 500 index gained 2.51, or 0.2%, to 1,128.33, and the Nasdaq composite index was up 5.02, or 0.3%, at 1,915.40.

While the overall retail sales report from the Commerce Department was disappointing, diffusing the positive momentum from July’s 0.8% increase, the reading was better once car sales were removed. Without them, retail sales rose 0.2% for the month, in line with Wall Street’s expectations.

However, with consumers unwilling to spend on big-ticket items like cars, Wall Street was concerned that they remained nervous about the economy and may cut their spending further.

“It’s no mystery that consumers are spending more on energy and fuel costs, and that’s started to filter down,” said Scott Wren, equity strategist for AG Edwards & Sons.

”What this boils down to is we need something that’s going to encourage consumers and help drive spending. We need to see better job growth and a better overall economy.”

Investors sent vehicle makers’ shares lower on the cloudy outlook – Ford and General Motors have already cut back production on 2005 models due to soft demand. Ford lost 12 cents to 13.98 and General Motors fell 35 cents to 42.65, while DaimlerChrysler AG edged 2 cents higher to 43.53.

Other sectors that lost ground today included materials and utility stocks, while healthcare, consumer discretionary stocks and technology made modest gains.

Many retailers are already adjusting their outlooks to reflect lower consumer spending. Office Depot said it expected its third-quarter earnings to fall below Wall Street estimates, and cut its full-year outlook due to slumping sales. Office Depot tumbled $1.10 to $15.10.

Supermarket chain Kroger was down 72 cents at $15.98 after reporting a 25% drop in earnings for the second quarter, blaming the decline on higher debt payments and a grocery workers strike. The company missed Wall Street expectations by 8 cents per share.

McDonald’s rose 43 cents to $27.60 after the fast-food company raised its annual dividend from 40 cents to 55 cents, a $690m (€563.5m) increase in its payout to investors.

Declining issues outnumbered advancers by nearly five to four on the New York Stock Exchange, where volume totalled 1.2 billion shares, compared with 1.29 billion on Monday.

The Russell 2000 index of smaller companies was down 2.14, or 0.4%, at 570.96.