Stocks are drifting lower on Thursday as investors digest lackluster retail sales data and sour comments out of England and the Euro-zone's central banks. Investors are nervous ahead of tomorrow's non-farm payrolls report where economists expect the U.S. economy to have lost 320,000 jobs in July. Weakness in the euro and the pound is giving the dollar a bounce and that's weighing on commodities.

Asian markets were mixed. The Chinese Shanghai index lost 2.1%. Yet the Hong Kong Hang Seng gained 1.9% and closed near 11-month highs. The Japanese NIKKEI climbed 1.3% and closed near 10-month highs. While financials were generally weak in Asia they were stronger in Europe. Investors were surprised to hear that the Bank of England was increasing its quantitative easing program of buying bonds. The BoE was upping the program from 125 billion pounds to 175 billion (about $84 billion). Britain's head bankers are worried about deflation and said the recession is "deeper than previously thought". The BoE kept interest rates unchanged at 0.5%. The European Central Bank (ECB) is also worried about deflation and kept rates at a record low of 1.0% for the third month in a row. ECB's President Jean-Claude Trichet said "Economic activity over the remainder of this year is likely to remain weak, although the pace of contraction is clearly slowing down." While the U.S. is getting excited about the recession ending (hopefully) the European economy continues to lag behind with negative growth. The French CAC-40 index gained 0.5% for the day. The German DAX rose 0.3%. The English FTSE rose 0.9%.

Lackluster same-store sales data in the U.S. overshadowed a minor improvement in the initial jobless claims this morning. The International Council of Shopping Centers said their aggregate index of same-store sales fell 5.0% in July. The estimate was for a drop of -5.5%. The overall tone of today's report reinforces the belief that consumers are nervous and they're holding on to their wallets and only spending on necessities. July's numbers don't bode very well for the back-to-school shopping season currently underway. Here's a quick look at some of the same-store sales data versus analysts' estimates.

ARO .. +6.0% vs. +9.8% (worse)
TJX .. +4.0% vs. +2.3% (better)
ROST . +4.0% vs. +0.8% (better)
KSS .. +0.4% vs. -3.2% (better)
TGT .. -6.5% vs. -5.8% (better)
JWN .. -6.9% vs. -11.1% (better)
COST . -7.0% vs. -6.7% (worse)
GPS .. -8.0% vs. -8.5%  (better)
M  .. -10.7% vs. -9.1% (worse)
WTSLA -12.1% vs. -10.2% (worse)
JCP . -12.3% vs. -11.4% (worse)
SKS . -16.3% vs. -16.6%  (better)
ANF . -28.0% vs. -26.9% (worse) 

What bulls will find encouraging is that several companies actually raised their earnings guidance. ARO upped their earnings guidance to the 54-55 cent range compared to analysts estimates at 50 cents. TJX guided to the high-end of their 56-59 range with analysts are already at 59 cents. KSS upped their estimates to 73-74 cents per share compared to the 67-cent estimate. GPS raised their earnings guidance to the 30-32 cent zone versus the 28-cent estimate. Macy's (M) really raised their estimates to the 15-17 cent range, minus any restructuring charges, compared to a 5-cent profit estimate by analysts. JCP upped their earnings estimate to a 1-cent loss versus analysts at an 8-cent loss. The RLX retail index managed to hit new highs for the year this morning but has since trimmed its gains to just 0.77%.

I mentioned the weekly initial jobless claim numbers. Traders probably ignored these as we wait for the non-farm payroll report tomorrow morning. However, the weekly numbers showed a little improvement. Analysts were expecting 580,000 new claims for unemployment and the Labor Department said new weekly claims came in at 550,000.

Scanning the markets it appears that semiconductors, energy, insurance and biotech are the real laggards today. Railroads, retailers, and gambling stocks are trying to hold on to positive territory. Meanwhile the volatility indices are surging as investors rush to buy options to protect themselves against a surprise in the jobs report tomorrow.

Currently the S&P 500 index is off almost 10 points at 993 and testing its 10-dma. The NASDAQ composite is down more than 23 points at its lowest levels of the day near 1970. The Dow Industrials are down about 70 points near 9210. The 9200 level has been short-term support this week. The small cap Russell 2000 index is down 9 points and testing its 10-dma.

Let's take a quick look at charts for the major averages:

Chart of the S&P 500:

Chart of the NASDAQ:

Chart of the Dow Industrials:

Chart of the Russell 2000 index:

The markets are slowly drifting lower so we're not seeing too much movement on the play list. More conservative traders may want to consider an early exit in our OEX call play and avoid holding over the jobs report. Our call play on VMI has hit our target to exit with the spike over $80.00 this morning. Our target was only $78.50. Weakness in the biotech sector is good news for our IBB and GENZ put plays. Our put play on the QLD is looking better as are both the VPRT and WYNN put plays.