Wall Street: under pressure
Major gauges dip as investors worry about Wal-Mart, bank stocks, mortgage market and credit crunch.
NEW YORK (CNNMoney.com) -- Stocks slid Tuesday afternoon as investors weighed revived worries about the mortgage market and a credit crunch, as well as disappointing profit forecasts from Home Depot and Wal-Mart Stores.
The Dow Jones industrial average (down 102.58 to 13,133.95, Charts) lost 0.6 percent almost three hours into the session, while the broader S&P 500 (down 11.37 to 1,441.55, Charts) index lost 0.6 percent. The tech-fueled Nasdaq Composite (down 14.38 to 2,527.86, Charts) index lost 0.5 percent. All three major gauges were off their lows of the late morning.
Stocks ended little changed Monday, giving up the day's gains, as investors showed relief that central banks around the world are addressing credit crunch worries, but remained wary amid lingering questions about the economy.
Stocks opened in mixed territory Tuesday, with the Dow and S&P 500 weaker, due to the impact of retailers and the stronger Nasdaq, as investors focused on the mild core inflation number in the morning's Producer Price Index (PPI). However, the tone soon turned resoundingly negative, with all three major gauges in the red.
In addition to the retail sector woes, financial stocks were hit once again on worries about the credit crisis. Additionally, a second look at the PPI, which showed a bigger-than-expected jump on the overall reading may have raised concerns about Wednesday's more closely-watched Consumer Price index (CPI), said Fred Dickson, chief market strategist at D.A. Davidson & Co.
"Today, bad news is outweighing the good news," Dickson said. "PPI was hotter than expected, Wal-Mart's outlook countered Home Depot's better earnings and there are residual concerns relating to the mortgage market."
Stocks have been battered on and off over the last few months on concerns about tightening of credit after a period of great liquidity. Investors have also been sorting through the impact of the slumping housing market, including the collapse of the subprime mortgage market - loans made to consumers with less than ideal credit.
Among the factors reviving some of this uneasiness Tuesday: media reports that Sentinel, a money market mutual fund firm for commodities, has asked regulators for permission to halt client withdrawals.
Additionally, Countrywide Financial (down $1.27 to $25.34, Charts, Fortune 500), the leading U.S. mortgage lender, slipped after the company said that foreclosures and delinquencies rose in July to their highest level in several years.
Fellow Dow retailer Home Depot (down $0.93 to $34.31, Charts, Fortune 500) slipped 2.5 percent after reporting higher-than-expected quarterly earnings on weaker-than-expected quarterly sales. The home improvement retailer also reiterated that its per-share profit will dip as much as 18 percent this year.
Other blue chip losers included tech stock Hewlett-Packard (down $0.73 to $47.70, Charts, Fortune 500) and financial stocks AIG (down $0.78 to $64.00, Charts, Fortune 500) and Citigroup (down $0.36 to $46.18, Charts, Fortune 500).
A variety of financial stocks slumped, lowering the Amex Broker/Dealer index by nearly 2 percent.
Shares of EMC (down $0.09 to $18.96, Charts, Fortune 500) slipped more than 2 percent in active New York Stock Exchange trade as investors took a 'sell the news' approach to the debut of its spinoff VMware. Software maker VMware (up $24.20 to $53.20, Charts) surged 73 percent Tuesday morning in its debut as a public company.
And Mattel (down $0.50 to $23.07, Charts, Fortune 500) shares slipped after the toy maker said it's expanding its toy recall to include over 9 million additional toys manufactured in China, as a result of lead paint and loose magnet risks.
Market breadth was negative. On the New York Stock Exchange, losers topped winners nearly three to one on volume of 760 million shares. On the Nasdaq, decliners beat advancers three to two on volume of 880 million shares.
On the economic front, the Producer Price index (PPI), a measure of inflation at the wholesale level, rose 0.6 percent in July, topping forecasts. However, prices excluding volatile food and energy rose just 0.1 percent, short of expectations.
Separately, the U.S. trade gap fell unexpectedly in June, with strong imports countering the impact of higher energy prices.
Treasury prices erased early losses, turning higher, lowering the benchmark 10-year note yield to 4.73 percent from 4.76 percent late Monday. Treasury prices and yields move in opposite directions.
In currency trading, the dollar rose versus the euro and the yen.
U.S. light crude oil for September delivery fell 22 cents to $71.40 a barrel on the New York Mercantile Exchange, erasing morning gains.
COMEX gold for December delivery fell 50 cents to $680.40 an ounce.