US stock futures pare gains on weak retail sales

NEW YORK — U.S. stock futures pared early gains Thursday as a number of retailers reported big drops in sales — a clear sign that the American consumer is still feeling the pain of a deep recession.

European markets also pared early gains after central banks in Europe kept their benchmark interest rates at historical lows, signaling a cautious stance on the economy.

Many U.S. retailers, including Costco Wholesale and Hot Topic, are reporting bigger-than-expected sales declines in May as shoppers keep their budgets tight. One factor that is likely weighing on results: a year ago, sales benefited from fiscal stimulus checks.

Consumer spending accounts for more than two-thirds of U.S. economic activity, so how retailers are faring says a lot about the state of the economy.

Later Thursday morning, investors will get more data on the jobs market — another key area of concern for investors. The government is expected to report that initial claims for jobless benefits dropped slightly last week, while continuing claims set another record. This would indicate that layoffs are slowing, but that unemployed workers are finding it difficult to get new jobs.

The jobs report will come a day ahead of the crucial tally of monthly job losses. Unemployment has been one of the market’s biggest concerns throughout the recession. Many analysts don’t expect unemployment to peak until the market’s recovery is well under way.

Some good news for the labor market came from Wal-Mart Stores Inc., which said it plans to hire about 22,000 people as it opens 150 new or expanded stores in the U.S. this year.

Ahead of the market’s open, Dow Jones industrial average futures rose 9, or 0.1 percent, to 8,678, after rising as much as 59 points earlier. Standard & Poor’s 500 index futures gained 0.80, or 0.1 percent, to 932.50, while Nasdaq 100 index futures added 0.25, or 0.02 percent, to 1,477.75.

Investors have been grappling with mixed signals on the economy lately. While some reports indicate the economy’s decline is slowing, others show that companies and consumers are still feeling the pain of a deep recession.

Many fear that the “green shoots” of economic growth that were the impetus for the market’s spring rally have yet to really bloom, which could indicate a slower, less robust recovery than originally hoped.

The market’s advance of more than 30 percent since early March was driven in large part by economic data that beat analysts’ and investors’ expectations. But those expectations were already very low. Now that the economy has shown small signs of improvement, the market’s expectations are rising and investors are now anxious for more clear indications of growth.

On Wednesday, investors broke a four-day streak of gains and sold stocks on worse-than-expected reports on factory orders and the services sector. The S&P 500 index dipped 1.4 percent, while both the Dow and the Nasdaq composite fell less than 1 percent.

Investors are likely to stay keenly focused on a number of areas that have been cause for concern as of late: consumer spending, unemployment, rising oil and commodity prices and a weakening dollar.

The dollar rebounded against the euro and the British pound Thursday after both the Bank of England and the European Central Bank maintained cautious stances on the economy and kept their benchmark interest rates at historical lows. Central banks around the world, including in the U.S., have slashed interest rates in an effort to keep borrowing costs low and spur the economy. The cuts, however, tend to weaken a country’s currency.

Both gold and oil prices resumed their three-month climbs following sharp pullbacks on Wednesday.

Light, sweet crude added 96 cents to $67.08 a barrel in electronic trading on the New York Mercantile Exchange.

Meanwhile, bond prices fell. The yield on the benchmark 10-year Treasury note, which moves opposite its price, rose to 3.58 percent from 3.54 percent. Last week, the 10-year yield surged to a six-month high of 3.75 percent on worries over mounting U.S. debt loads. That fanned fears of rising interest rates on mortgages and other consumer loans that are tied to the 10-year Treasury note.

Overseas, Japan’s Nikkei stock average fell 0.8 percent and Hong Kong’s Hang Seng index slipped 0.4 percent. In European trading, Britain’s FTSE 100 reversed early gains and fell 0.5 percent after the interest rate decisions. Germany’s DAX index rose 0.1 percent and France’s CAC-40 gained 0.4 percent.