Wall Street: No solace in Bernanke speech

Stocks continue earlier retreat with Dow falling over 100, after series of earnings warnings, continued subprime fears.

By David Ellis, CNNMoney.com staff writer

NEW YORK (CNNMoney.com) -- The Dow industrials tumbled about 100 points Tuesday afternoon as investors weighed a speech on inflation by Federal Reserve Chairman Ben Bernanke while a handful of profit warnings added to general nervousness in an already jittery market.

The 30-share Dow (down 112.10 to 13,537.87, Charts) sank as much as 123 points and were about 0.7 percent lower with 90 minutes left in the session. The broader S&P 500 (down 15.32 to 1,516.53, Charts) slipped 1.1 percent, while the tech-fueled Nasdaq (down 23.20 to 2,646.82, Charts) sank about 1 percent.


Investors appeared to largely overlook a speech on inflation by Federal Reserve Chairman Ben Bernanke, who said energy price spikes have not led to persistent inflation or a recession in recent years.

Delivering a speech to the National Bureau of Economic Research, the Fed chief said "changes in energy [and food] prices should have relatively little influence on 'core' inflation, that is, inflation excluding the prices of food and energy."

Stocks retreated earlier following a series of profit warnings at the start of the second quarter earnings season, which starts in earnest this week.

Retailer Sears Holdings (down $16.69 to $154.72, Charts, Fortune 500) said it expects lower profit for the quarter, sending shares of the retailer down over 8 percent on the Nasdaq.

The nation's largest home builder, D.R. Horton, reported a 40 percent drop in new home orders last quarter and said it expected to post its first quarterly loss since 1995 in the third quarter. D.R. Horton (down $0.47 to $19.32, Charts, Fortune 500) shares slipped nearly 3 percent in afternoon trade.

Home improvement retailer Home Depot (up $0.08 to $40.31, Charts, Fortune 500) lowered its earnings outlook for the fiscal year early Tuesday, citing weaker conditions in the housing market. Shares of the Dow component edged higher on the New York Stock Exchange, despite the news.

"We had some earnings announcements that were disappointing with a market that had been levitating so you are getting a selloff," said James Awad, chairman at Awad Asset Management.

After appearing to subside last week, the recent mess in the subprime mortgage sector reemerged Tuesday after the credit rating agency Standard & Poor's said it may cut $12 billion of subprime related debt, saying it expected more delinquent and defaulted U.S. home loans.

Overseas, the dollar fell to a record low against the euro and eased versus the yen amid continued pessimism about the dollar.

In corporate news, Gemstar-TV Guide (up $0.65 to $5.99, Charts), which publishes TV Guide magazine and cable channel, announced it had put itself up for sale, sending its shares up nearly 13 percent.

Aluminum giant Alcoa extended its outstanding offer to acquire Canadian rival Alcan (down $1.44 to $85.51, Charts) Tuesday, just after posting a dip in quarterly profit that met forecasts after the market close Monday.

Shares of General Motors (up $0.63 to $37.40, Charts, Fortune 500) led the handful of Dow gainers, climbing 2.5 percent after J.P. Morgan Securities upped its rating of the automaker and crosstown rival Ford Motor Co. (up $0.07 to $9.15, Charts, Fortune 500)

Oil prices rose as U.S. light crude for August climbed 71 cents to $72.90 a barrel.

In the only economic news of the day, the Commerce Department reported that inventories of unsold goods rose more than expected during the month of May.

Treasury prices climbed, lowering the yield on the 10-year note to 5.06 percent from the 5.15 percent level reached late Monday.

COMEX gold for August delivery rose $4.20 to $654.80 an ounce.

Market breadth was negative. Losers topped winners nearly 3 to 1 on the New York Stock Exchange as 845 million shares changed hands. On the Nasdaq, decliners beat advancers over 2 to 1 on volume of 1.3 billion shares.  Top of page