Retail sales report boosts stock market

NEW YORK - Good news on U.S. retail sales lifted the stock market Thursday, although worries about the latest plunge in oil prices kept the gains in check.

Investors are caught between two conflicting thoughts: the improving U.S. economy, lower energy costs and higher consumer spending are expected to boost profits for many companies. But the recent drop in oil prices, which has accelerated in recent days, has investors worried that earnings for energy companies will suffer.

The drop in the price of oil has been a significant reason why stocks on pace to post their first weekly loss in nearly two months.

"Here on one hand the U.S. economy is doing very well. You can see it today in the retail sales numbers. But the global economy isn't doing well, which is why oil prices are dropping," said Russ Koesterich, global chief investment strategist at Blackrock.

The Dow Jones industrial average rose 63.19 points, or 0.4 percent, to 17,596.34. It was up 225 points earlier.

The Standard & Poor's 500 index rose 9.19 points, or 0.5 percent, to 2,035.33 and the Nasdaq composite rose 24.14 points, or 0.5 percent, to 4,708.16.

Companies that rely the most on spending by consumers rose the most Thursday. The S&P 500 consumer discretionary sector, a category that includes department stores and other retailers, gained 0.7 percent, while makers of consumer staples increased 0.8 percent.

Urban Outfitters, GameStop, Coach, Best Buy and Macy's were among the biggest gainers.

The rise came after the Commerce Department said U.S. retail sales rose by 0.7 percent in November. The encouraging retail sales report could not have come at a more crucial time for retailers, since holiday sales often mean the difference between retail companies reporting a profit or a loss for the year.

Falling gasoline prices led to a decline of 0.8 percent in sales at gas stations, but that money was likely spent elsewhere, investors said.

"(Lower oil prices) are a very big tax cut for U.S. consumers," Koesterich said. "Middle-income families are spending what they would spend on gas on other parts of the economy."

Another downturn in the price of oil discouraged buyers.

Oil fell 99 cents to close at $59.95 a barrel, its first time below $60 a barrel in more than five years. That's on top of steep plunges of $2.88 a barrel on Wednesday and $2.79 a barrel Monday. It's down sharply from its recent high of $107 a barrel in June.

Earlier in the day, oil prices seemed to be holding steady above that $60 mark, which in turn helped keep energy stocks higher. But oil could not keep up the momentum, and slid in afternoon trading.

"Once oil broke $60 a barrel, the market followed," said Jonathan Corpina, a trader at Meridian Equity Partners.

While lower oil prices are good for consumers, many energy companies rely on high oil prices to justify drilling in remote parts of the globe for hard-to-reach reserves of crude. Energy companies also make up a big part of the U.S. stock market.

Oil drillers and drilling equipment suppliers were among the biggest decliners. Nabors Industries fell 34 cents, or 3 percent, to $10.51. Transocean lost 37 cents, or 2 percent, to $17.02. Chesapeake Energy fell 43 cents, or 2.5 percent, to $16.71.

With the decline in oil, the S&P 500's energy component is down 7 percent this week alone. It's down 13 percent for the year.

"Now with oil prices coming down so much ... people are just getting a little bit nervous and they're taking their gains before they lose them before year-end," said Robert Pavlik, chief market strategist at Banyan Partners.

Among individual companies, Lending Club, a peer-to-peer lending platform, rose $8.43, or 56 percent, to $23.43 on its first day of trading. Lending Club's initial public offering priced at $15 a share on Wednesday night, above the estimated range.

U.S. government bond prices were little changed. The yield on the 10-year Treasury note held at 2.17 percent. The dollar rose 1.4 percent against the yen to 118.98 yen. The euro fell 0.7 percent to $1.2395.

Precious and industrial metals futures closed mixed. February gold fell $3.80 to $1,225.60 an ounce, March silver fell eight cents to $17.11 an ounce and March copper rose three cents to $2.92 a pound.