Rate fears, retailers sink Wall Street

Stocks looked ready to fall in the early going Thursday as the yield on the 10-year note crossed the 5 percent level for the first time in 10 months, and major retailers such as Wal-Mart reported generally weak sales once again.

Stock futures fell indicating a lower open following a sharp sell-off in stocks Wednesday on interest rate worries.

Treasury prices fell sharply in early trading, which lifted the yield on the 10-year to cross the psychologically significant 5 percent threshold, reaching 5.03 percent, up from 4.96 late Wednesday. Yields have not closed at or above 5 percent since August.

No. 1 retailer Wal-Mart Stores (Charts, Fortune 500) led a group of major chains reporting generally weak May sales. It said sales at stores open at least a year, a closely watched retail measure known as same store sales, grew only 1.1 percent, at the low end of its guidance and below the consensus forecast of a 1.4 percent rise, according to analysts surveyed by sales tracker Thomson Financial.

Thomson's survey found analysts looking for only 2.7 percent growth overall among 50 retailers it tracks, down from the 4.5 percent rise a year earlier, as record gasoline prices in the month may have cut into other forms of consumer spending. With about two-thirds of those retailers reporting, Thomson said that fully half were missing the forecasted sales.

There were some better than expected results, though. Wholesale club Costco (Charts, Fortune 500), which reported a 7 percent gain in the month, easily topping Thomson's forecast of 5.6 percent.

In other corporate news, Brian Tierney, the public relations and advertising executive who last year led an investor group that bought the Philadelphia newspapers, is interested in making a bid for Wall Street Journal publisher Dow Jones (Charts), according to a report in the Journal. The interest comes as the Bancroft family, which controls the voting shares of the company, considers a $5 billion bid from News Corp. (Charts, Fortune 500)

A federal judge in New Orleans gave the plaintiff who had won a $51 million verdict against Merck (Charts, Fortune 500) over its painkiller Vioxx the choice of accepting a $1.6 million award or having a new trial. The judge had already thrown out the earlier verdict, terming it "grossly excessive." The ruling was a setback for Merck's attorneys, who had argued for a new trial. Shares of the Dow component slipped 0.1 percent in after-hours trading.

In overseas markets, stocks in Asia closed mixed, with the major indexes in Tokyo and Hong Kong little changed on the day. Stocks in Europe also were mixed. The dollar was higher against the euro and the yen in early trading.

Oil prices were higher in early trading, crossing the $66 a barrel mark after a raid by Turkish troops into northern Iraq revived worries over exports from the Middle East. U.S. light crude gained 17 cents $66.13 a barrel in electronic trading.

The only economic reports due Thursday are an 8:30 a.m. ET report on initial jobless claims for last week, which are expected to rise to 312,000 from 310,000 the previous period, and a 10 a.m. report on wholesale inventories for April, which are expected to show a 0.3 percent rise, matching the gain in March. [via]