U.S. Stocks To Open Lower Amid Retail Sales, Inflation Jitters

NEW YORK (MarketWatch) -- U.S. stocks were set to open lower on Thursday, as mixed May sales from the nation's retailers and lower jobless claims helped push the yield of a key benchmark bond above 5%, further challenging the attractiveness of stocks.

Futures for the Dow Jones Industrial Average fell 14 points to 13,447, while those for the S&P 500 index eased 2.70 points to 1,513.

Nasdaq 100 futures lost 4.50 points to 1,909.

Among blue-chips, Procter & Gamble fell 1% before the open. It was downgraded to equal-weight from overweight at Lehman Brothers on concerns over margin growth.

Wal-Mart Stores fell 0.6% after it posted a modest gain in May same-store sales, narrowly missing Wall Street estimates, battered by weakness in its apparel and home merchandise.

Overall, however, retailers were posting an improvement in May sales after bleak results in April. With most retailers having reported, 50% either beat or met estimates, while the other 50% missed, according to Thomson Financial.

J.C. Penney , Macy's , AnnTaylor and Abercrombie & Fitch all reported sales below estimate, while Costco Wholesale Limited , Nordstrom and Jos. A. Bank Clothiers beat estimates.

10-year yield above 5%

Investors have been warily monitoring rising bond yields since last week. Higher yields make bonds more attractive to investors relative to riskier bets in the stock market.

Better-than-expected economic data, along with hawkish comments by Federal Reserve Chairman Ben Bernanke and other Fed officials have pressured the price of inflation-sensitive bonds, lowering their yields.

Early on Thursday, the yield of the benchmark 10-year finally topped 5% for the first time since August 2006.

At the same time, rising interest rates globally are also putting pressure on stocks.

On Thursday, the New Zealand central bank hiked rates to 8%. The Bank of England, on the other hand, held rates unchanged.

Correction in the cards?

Market analysts also point to the U.S. market's record-setting rally, which began last summer and drove the Dow and the S&P 500 to record highs, with only a short-lived interruption in late February/early March.

"The overbought condition we've been looking at in the market has persisted for 2-1/2 months," said Marc Pado, market strategist at Cantor Fitzgerald. "Bull markets can produce a few 3-month overbought runs, but it typically doesn't last longer than that without some correction back to neutral."

Deals on the backburner

A group of investors including Blackstone Group upped its Biomet offer to $11.4 billion, or $46 a share. The increased offer came as the proxy advisory service Institutional Shareholder Services urged an earlier $44 offer to be rejected.

Dow Jones & Co., could see attention after Brian Tierney, who led a group of investors that bought the Philadelphia Inquirer and Philadelphia Daily News, told The Wall Street Journal that he could be interested in buying the firm. Dow Jones has received an unsolicited $5 billion offer from News Corp . Dow Jones owns the Journal as well as MarketWatch, the publisher of this report.

PepsiCo and PepsiAmericas agreed to jointly buy 80% of a Ukrainian juice firm, Sandora, for $542 million plus assumed debt. The deal won't affect PepsiCo's earnings but will hurt PepsiAmericas, the companies said.

Other markets

The dollar advanced against the euro and the yen, finding a bid from rising bond yields and fading expectations that the Fed will cut interest rates.

Oil futures rose 20 cents to $66.16 a barrel in electronic trading.

By Nick Godt