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Thursday August 9, 10:03 am Eastern Time

Morningstar.com

By Scott Cooley

Weaker-than-expected retail sales buffeted the market Thursday morning, with all three major indexes posting losses in early trading. At 9:30 a.m., the Dow Jones Industrial Average had slipped 50 points to 10,243, the S&P 500 had fallen five to 1,178, and the Nasdaq Composite index had dropped 13 to 1,953.

Laggards

Although discounters like Wal-Mart Stores posted strong same-store sales growth in July, that was not the case at apparel retailers such as

Abercrombie & Fitch and Gap Stores. Abercrombie & Fitch fell 15.6% to $30.50 in early trading, after it announced that same-store sales last month had declined 14%. Meanwhile, after falling a bit harder at the open, Gap Stores was down 1.9% to $26.66. Morningstar analyst Mike Porter says that although Abercrombie & Fitch is a bit pricey, he still likes it, as he thinks the company will be a ``winner in the back-to-school season.'' However, he argues that Gap Stores is still ``not cheap enough to buy,'' as the giant company faces limits on its growth and merchandising problems.

Sun Microsystems fell 4.4% to $16.50 in early trading after a Wall Street brokerage issued a note saying the company still faces a slow summer selling season. Morningstar senior analyst Joseph Beaulieu says there was nothing new in that research note, and he still considers Sun to be significantly undervalued. This morning's sell-off just reflects investors' skittishness about tech in general, according to Beaulieu, who points out that the stock had posted a healthy double-digit gain in recent weeks.

After announcing its takeover of Canadian contract manufacturer C-Mac, Solectron fell 11.3% to $15.25. Morningstar analyst Jeremy Lopez says the market was reacting negatively for two reasons: Solectron is paying a 30%-plus premium for the company, and C-Mac's sales are heavily tied to the troubled telecom-equipment industry. Still, Lopez says Selectron's shares are undervalued. Although it operates in a ``low-margin industry, in the long term, there's a big growth opportunity'' for patient investors. C-Mac's shares rose 15.9% to $26.28.

Prices as of 9:45 a.m. Central time. See current prices of these stocks. Compiled from staff reports, company press releases, and news services.

Thursday August 9 11:37 AM ET, By Chelsea Emery

NEW YORK (Reuters) - Stocks extended their slide in late-morning trading on Thursday as more evidence of continued weakness in the U.S. economy, weighed on the market. Abercrombie & Fitch was one of many retailers to fall after reporting bigger-than-expected slump in July sales. In addition, jobless claims, along with the Federal Reserve 's downbeat ``Beige Book'' summary of regional economic conditions released on Wednesday, painted a picture of lagging growth, traders said.

``There are all these incremental pieces of news showing that the economy is still slowing, there's no sign of a bottom yet,'' said Donna

Van Vlack, director of trading at Brandywine Asset Management. ``My portfolio managers come down here and ask, 'what should I buy?' and I say 'I don't see anything groovy.''' The technology-heavy Nasdaq composite index dropped 20.63 points, or 1.05 percent, to 1,945.73, posting its fifth straight session of losses that puts it on track to close at the lowest since mid April. The Standard & Poor's 500 index was off 6.92 points, or 0.58 percent, at 1,176.61 and the Dow Jones industrial average fell 60.82 points, or 0.59 percent, to 10,232.68.

About 19 stocks fell for every 11 that rose on the Nasdaq, while seven fell for every six that fell on the New York Stock Exchange.

Nortel Networks Corp. slipped 23 cents to $7.39 and was the most-active stock on the NYSE. The world's largest telecommunications equipment supplier said it plans to privately sell $1 billion of convertible senior notes. The sale of the seven-year notes is expected on Thursday night, a person close to the sale said.

A convertible bond is a hybrid security that can be converted into company stock. Shares often fall after a company announces a sale

because some investors sell the underlying stock short, the bonds may dilute the stock and bondholders rank ahead of shareholders in a

company's capital structure. Investors said they are wary about the economic outlook after the Fed on Wednesday said the economy remained sluggish in June and July, and the recent slide in the manufacturing sector began to infect other areas of the economy. It reported weakness in the factory sector in almost all regions.

Heightening worries, the Labor Department said the number of Americans seeking first-time claims for jobless benefits jumped by

33,000 in the latest week, more than economists surveyed by Reuters had expected. In addition, retailers slammed Wall Street with disappointing sales. Youth-oriented apparel retailer Abercrombie & Fitch said sales dropped 14 percent from the year-ago, more than double the drop of 4 to 6 percent analysts had expected. The company also said third- and fourth-quarter earnings would be below analysts' forecasts. Its stock tumbled $5.71 to $30.30.

Gap Inc. the No. 1 apparel chain's sales fell 12 percent from a year ago. Gap lost $1.17 to $26. Wal-Mart Stores Inc. , the world's largest retailer, was off 45 cents to $54.17, even after saying sales rose 6 percent in July, above its expectations. But on a brighter note, J.C. Penney Co. Inc. said July sales rose 2.2 percent, above its expectations. Penney rose 9 cents to $27.30. Amid merger news, Solectron Corp. fell $2.42 to $14.78 after the world's largest electronics contract manufacturer agreed to buy Canada's C-MAC Industries Inc. for $2.7 billion to expand its technology, manufacturing capacity and access to the automotive market.

Based on Solectron's closing price of $17.20 on Wednesday, the deal is valued at a 33 percent premium over the Canadian company's stock at Wednesday's close. C-MAC's U.S. traded shares jumped $2.62 to $25.30. Western Wireless Corp. was off $1.22 at $34.05 after the wireless telephone service provider posted a larger than expected loss. It also said subscriber growth fell short of expectations. Anchor Gaming , the gambling equipment maker now merging with industry giant International Game Technology, jumped $2.30 to $50.10 after its earnings rose 9 percent. The company expects to report fiscal first-quarter profit of $1.25 a share, more than the average forecast of

$1.15 by analysts surveyed by Thomson Financial/First Call.