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Market Update

U.S. Challenges American-U.S. Air Merger, Ackman Quits Penney Board

Author: Nichole Harper
Last Update: 4:32 PM ET August 13 2013

4:10 PM New York – U.S. market indexes reversed early losses to close higher after retail sales increased for the fourth month in a row. Activist investors Bill Ackman resigned from J.C. Penney’s board as many shareholders pin blame on him for chief executive selection and retail strategy that led to sales plunge of 25% and cash squeeze.

U.S. stocks opened higher but quickly faced a sell-off and widely followed indexes dropped as much as 0.6% in the first hour of trading.

Market indexes staged a slow and steady recovery and surged as much as 0.5%.

The S&P 500 index closed up 0.3% to 1,694.17 and the Nasdaq Composite Index gained 0.4% to 3,684.44.

U.S. retail sales rose for the fourth month in a row in July, Commerce Department said today. Retail sales increased 0.2% after rising 0.6% in June.

A separate report from the department showed inventories at U.S. companies were nearly unchanged in June. Inventory on hand was for 1.29 months at merchants surveyed by the Commerce Department, matching the ratio previous month and the data as far back as a year ago.

The report showed that auto sales in the month declined 1% after rising 2.9% in the previous month.

U.S. Stocks in Review

Apple Inc (AAPL) increased 5% ahead of company event scheduled on Sept 10 and expectations ran high that gadget maker will release new version for its popular tablets and phones.

J.C. Penney Co. decreased 4% after the activist investor Bill Ackman, who waged a public fight with fellow directors, resigned from the company board.

Ackman is the largest investor in the retailer with 17.7% stake and stand to lose at least $700 million.

Home builders declined on the worries that the rising interest rates will crimp the recovery in the housing market.

Orbitz Worldwide Inc (OWW) declined 13% and the company said PAR Capital Management sold one third of its holding or 8.1 million shares.

U.S. Airways (LCC) plunged 12% after the U.S. Justice Department and six states filed a lawsuit to prevent its merger with American Airlines. Two airlines vowed to fight the case vigorously.

The lawsuit argues that travelers would face higher fees and charges. The Justice Department filed the case along with states of Arizona, Florida, Pennsylvania, Tennessee, Texas, Virginia and the District of Columbia.

“While shareholders might benefit, creditors might benefit from consolidation, the fact of the matter is consumers will get the shaft,” Bill Baer, assistant attorney general for the antitrust said in a conference call.

The merger of two airlines has been approved by shareholders, creditors and the European Union.

Yum Brands Inc (YUM) decreased 2.5% after the fast food chain operator said same-store sales in China declined 13% in the last month as consumers stayed away from KFC restaurant chain following an outbreak of avian flu.

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