Stocks Down on Weak Wal-Mart Earnings

NEW YORK -- Wall Street pulled back on Monday as investors showed concern about the pace of consumer spending after Wal-Mart Stores Inc. reported weaker-than-expected quarterly results.

The world's biggest retailer cut its profit outlook amid weak economic conditions that are crimping consumer spending. Home Depot Inc., the world's largest home improvement chain, said Tuesday that weakness in the housing market caused its quarterly profit to slip almost 15 percent.

The pair of disappointing earnings reports offset government data released before the market opened that indicated that inflation remains in check. The Labor Department said wholesale prices rose in July for the fifth time in six months, while the Commerce Department said the U.S. trade deficit fell to a four-month low in June.

Despite the decline in major indexes, analysts said the tone of the market appears more stable compared to the recent volatility triggered by a widening credit and debt crisis. The Federal Reserve, which has injected some $64 billion of liquidity into the U.S. banking system since Thursday, said Tuesday it stood ready to act again should market conditions warrant.

"Wal-Mart aside, you're still seeing a bit of stability in the market due to central banks around the globe providing liquidity to the financial markets," said Mike Malone, a trading analyst at Cowen & Co. "Given the fact there's very little visibility about how the economy and credit markets will play out, this kind of market is encouraging because there is still a tremendous amount of risk out there."

Story Continues Below

The European Central Bank injected another $10.5 billion into money markets on Tuesday and said conditions were normalizing after several days of volatility. There was no action Tuesday by the Fed.

In midmorning trading, the Dow Jones industrial average fell 93.35, or 0.72 percent, to 13,141.18.

Broader stock indicators were lower. The Standard & Poor's 500 index shed 11.11, or 0.76 percent, at 1,441.81, and the Nasdaq composite index fell 12.88, or 0.51 percent, at 2,529.36.

Bonds rose, with the yield on the benchmark 10-year Treasury note falling to 4.76 percent from 4.78 percent late Monday. The fixed-income market has risen as stock investors move into securities deemed less volatile.

The Labor Department reported its producer price index advanced 0.6 percent amid higher energy costs. Excluding often volatile food and energy costs, however, what's known as core PPI rose a modest 0.1 percent.

Meanwhile, the Commerce Department said the trade deficit fell because of highest-ever exports of farm goods and automobiles offset a jump in energy prices. The trade deficit dropped to $58.1 billion in June, a 1.7 percent decrease from May and the lowest imbalance since February.

Wal-Mart, one of the 30 stocks included in the Dow, fell $2.29, or 5 percent, to $43.88. The company lowered its profit forecast amid weak economic conditions that it blames for hurting consumer spending globally. Major retailers have been reporting largely lackluster sales results for months.

The retailer's second-quarter profit rose 49 percent but results excluding one-time items fell short of Wall Street's expectations. Wal-Mart said some of its customers were straining under economic pressures such as higher oil prices.

Home Depot, the world's largest home improvement store chain, reported a 14.8 percent decline in its second-quarter earnings as sales slipped, particularly among stores open at least a year. Quarterly figures topped Wall Street's forecasts and the company reiterated that it expects its earnings per share from continuing operations to decline for fiscal 2007. The company said, however, that a sluggish housing sector could make conditions difficult. Shares fell 15 cents to $35.09.

Mattel Inc. shares fell 81 cents, or 3.4 percent, to $22.76 after it announced the recall of 8.8 million toys. It was the second big recall of Chinese-made toys in just two weeks.

Declining issues outpaced advancers by a 3 to 2 basis on the New York Stock Exchange, where volume came to 242.2 million.

Light, sweet crude rose 58 cents to $72.20 on the New York Mercantile Exchange. The dollar was mixed against other major currencies, while gold prices edged higher.

The Russell 2000 index of smaller companies rose 1.11, or 0.14 percent, to 780.92.

Overseas, Japan's Nikkei stock average rose 0.27 percent. In afternoon trading, Britain's FTSE 100 rose 0.40 percent, Germany's DAX index slipped 0.16 percent, and France's CAC-40 fell 0.22 percent.

Editor's note:
The 99 stocks you need to dump in 2007 . . . and the 10 to buy! Get our free report today.
Big Gains as Stocks Go Up ... Or Down! -- Find Out How
The 3 Best Income Stocks in the World