Market Wrap-Up

The Commerce Department said retail sales increased an unexpected 1% in May. That got the stock market off to a good start Thursday after the previous day's 200-plus-point drop. Unfortunately, the rally didn't last.

The sales numbers had many traders speculating it would give the Federal Reserve ample reason to raise interest rates a quarter point later this month to help fight inflation. That scenario also strengthened trading in the U.S. dollar. Meanwhile, the financial-services industry got a boost from Morgan Stanley after it upgraded the sector. That came on a day when Lehman Brothers dismissed two high-profile executives. Toward the end of the trading session, though, news broke that deal talks between Microsoft and Yahoo had broken down once again. The Dow Jones Industrial Average had been up over 100 points before briefly losing all those gains. However, by the closing bell it had managed to post just a 58-point gain to 12,142. Oil closed flat at $137 a barrel.

Winners

Financials enjoyed a broad rally Thursday, as day after traders bailed on these stocks. The

SPDR KBW Capital Markets ETF

Goldman Sachs

Merrill Lynch

Emerging markets like India also enjoyed an uptick. PowerShares India Portfolio jumped 3.9% in relatively light trading.

Losers

As news broke that Yahoo and Microsoft couldn't manage to work out a deal, whether it be a partnership or a complete merger, the search engine's shares were hit hard. Yahoo dropped 10.3%, pretty much all of that dip coming in the last hour of trading.

Internet HOLDRS

As the dollar strengthened, traders moved out of inflation hedges like gold-oriented funds. Market Vectors Gold Miners slid 2.6%.

Thursday's Industry Headlines

Launching Pad

: PowerShares announced the trading of the Nasdaq 100 BuyWrite Portfolio and Nasdaq Internet Portfolio exchange-traded funds. The first fund follows a covered call strategy on the 100 largest nonfinancials trading on the Nasdaq, while the other one tracks the largest Internet-related companies listed on that same exchange.

ProShares was also busy christening new funds. It launched the ProShares Short Oil & Gas and ProShares Short Financials ETFs. Those two funds allow investors to make bearish bets on their underlying indexes.

Friday's Notebook

Earnings

: Carnival Corp., Forest City Enterprises, Kenneth Cole, Smith & Wesson

Economic Data: Consumer Price Index (8:30 a.m.)

Quick Take

A look at how the industry's most popular ETFs did on Thursday.