[R]9:00AM U.S. stock futures traded lower on weak retail sales and wider trade deficit.[/R]
U.S. stock futures traded lower Thursday, as investors digested disappointing April retail sales and bigger-than-expected increases in the trade deficit and import prices. The Commerce Department said that U.S trade deficit for March widened by 10.4% to $63.9 billion, compared with expectations of a deficit of $59.6 billion. Import prices rose 1.3% in April driven by sharply higher petroleum prices, topping the average economist estimate of a 0.9% increase. In another economic report, the Labor Department said that initial jobless claims fell by 9,000 to 297,000 last week.

Retailers disappointed with much weaker-than-anticipated April same-store sales, although the declines were largely expected because of the robust sales in March, helped by an early Easter. The list of companies missing expectations include Wal-Mart Stores, (WMT: chart), Federated (FD: chart), Gap (GPS: chart), AnnTaylor Stores (ANN: chart), Nordstrom (JWN: chart), Pacific Sunwear (PSUN: chart), New York & Co. (NWY: chart), Limited Brands (LTD: chart), Abercrombie & Fitch (ANF: chart) and others. Costco Wholesale (COST: chart) was one of the very few retailers posting better-than-expected sales.

Among companies releasing quarterly earnings, Whole Foods Market Inc. (WFMI: chart) plunged 12% in pre-market trading after the natural and organic foods grocery retailer missed Q1profit expectations. The company said that quarterly earnings fell 11.2%, and that federal regulators raised antitrust concerns about its proposed purchase of smaller rival Wild Oats Markets Inc. (OATS: chart). Urban Outfitters (URBN: chart) said Q1 net income rose to 17 cents a share, up from 12 cents a share, with sales rising 16% to $314.5 million. Quarterly results came in line with exoectations.

Viacom (VIA: chart) reported 36% earnings drop in Q1, pressured by higher marketing expenses for movies and a restructuring charge at MTV. The media company posted earnings of 29 cents a share, down from 43 cents a share a year earlier. Revenues grew 16% to $2.75 billion. S&P 500 futures dropped 3.80 points to 1,511.80 and Nasdaq 100 futures slid 6.00 points to 1,906.25. Dow industrial futures slumped 33 points to 13,351.


[R]8:15AM Retailers posted weaker-than-expected April sales.[/R]
Retailers attracted attention early Thursday with the release of April sales figures. The majority of them reported robust March same-store sales due largely to an early Easter, tipping off investors that their April sales would come below expectations. Among the first to report April same-store sales were Costco Wholesale, Claire’s Stores, Mothers Work, and Chico FAS.

Costco Wholesale (COST: chart) posted 7% increase in its same-store sales in April, beating expectations of 6.3% growth. Costco said it benefited from one extra day of sales, which resulted in a 2% lift. In the four weeks to May 6, total sales rose 12% to $4.94 billion. Wal-Mart (WMT: chart) posted a 3.5% decline in same-store sales, well below estimates of a 1.1% decrease. The world''s biggest retailer said it expects May same-store sales to rise 1% to 2%.

Claire''s Stores, Inc. (CLE: chart) said its April same-store sales fell 6%, missing estimates of same-store sales drop of 2%. Total sales for the four-week period rose 1% to $105 million.

Maternity clothing retailer Mothers Work (MWRK: chart) said its April sales at stores open at least one year dropped 14.8%, missing analyst expectations of a decline by 12%. The retailer attributed the decline to the earlier timing of Easter. Total sales for the period slipped 9.9% to $52.3 million.

Gap (GPS: chart) said its April same-store sales tumbled 16%, down from expectations of a decline of 7.1%. Total sales fell 11% in the period to $1.09 billion from $1.23 billion. Chico FAS Inc. (CHS: chart) reported comparable sales drop of 7.3%, compared to the estimate for a loss of 0.6%. Total sales increased 9.8% to $148.7 million from $135.5 million.

J. C. Penney Company, Inc. (JCP: chart) said its comparable department store sales fell 4.7%, compared to the initial guidance to be flat. Total department store sales decreased 2.7%. Limited Brands Inc. (LTD: chart) said same-store sales slipped 1% in April, slightly below expectations of 0.6% decline. Total sales rose to $688 million from $653.2 million a year earlier.

Federated Department Stores (FD: chart) posted same-store sales decline of 2.2%, missing its forecast for an increase of 2.5% to 4%. Analysts had been expecting a rise of 1.7%. Total sales dropped 2.1% to $1.84 billion.


[R]6:30AM European markets were little changed Thursday ahead of important rate decisions.[/R]

The U.K. FTSE 100 index edged down 0.1% at 6,545.80, the German DAX Xetra 30 index was up 0.1% at 7,483.90 and the French CAC-40 index traded 0.1% lower at 6,045.08. National benchmarks decreased in all of the 17 western European markets that were open except Denmark, Greece and Luxembourg.

Economic news

The Bank of England is expected to hike rates by a quarter point to 5.5% in an attempt to curb inflation, while the European Central Bank is expected to keep rates on hold at 3.75% while at the same time hinting at a June rate increase.

Advancers

Hammerson shares rallied 8.6% after reports that New York-based buyout firm Kohlberg Kravis Roberts & Co. and Vornado Realty Trust may bid for the U.K. owner of malls and offices.

Premiere shares advanced 2.6% after it reversed to a profit of 4.5 million euros in the first quarter of the year. Last year, it posted a loss of 18.3 million euros.