Stocks take a thumping

Dow down 184 points and Nasdaq tumbles 3% as a weaker-than-expected retail sales report triggers an investor retreat.

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By Alexandra Twin, CNNMoney.com senior writer

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NEW YORK(CNNMoney.com) -- Stocks tumbled Wednesday, with the Nasdaq and S&P 500 falling for a third straight session, after a weaker-than-expected retail sales report gave investors a reason to retreat.

The Dow Jones industrial average (INDU) lost 184 points, or 2.2%. The S&P 500 (SPX) index fell 24 points, or 2.7%. The Nasdaq composite (COMP) dropped 52 points, or 3%.

The worse-than-expected retail sales dragged on stocks, said Ryan Detrick, senior technical strategist at Schaeffer's Investment Research. He said investors were also a little jittery about the bevy of banks rushing to raise capital to pay back the government bailout money they received.

"We were due for a pause here and with questions about the consumer and the banks, investors are finding an excuse to take some profits," he said.

Stocks seesawed Tuesday as investors showed caution after a roughly 2-month rally that propelled all the major stock gauges by at least 30%. That hesitation remained in place Wednesday.

Stocks have risen since early March on bets that the economy is close to turning a corner.

"I think the momentum has gotten a little ahead of itself," said Robert Loest, portfolio manager at Integrity Funds. "We've run out of good news for the time being."

He said that later in the year, there will be more positives for investors to key off of, as fourth-quarter earnings are bound to show improvement versus abysmal results a year earlier. Additionally, the impact of the government putting trillions of dollars into the economy will have an impact.

Thursday brings the government's April Producer Price index and the weekly jobless claims index. Also Thursday, Wal-Mart Stores (WMT, Fortune 500) is due to report quarterly results before the start of trade. Wal-Mart is expected to have earned 77 cents per share versus 76 cents a year earlier.

Economy: Retail sales fell 0.4% in April, according to a report from the Commerce Department released before the market open. Sales were expected to hold steady, according to a consensus of economists surveyed by Briefing.com. Sales fell a revised 1.3% in March.

Sales excluding volatile autos fell 0.5% in April, after dropping 1.2% in the previous month. Economists forecasts had called for a rise of 0.2%.

The number of U.S. households facing foreclosure jumped 32% in April versus a year ago, according to RealtyTrac. More than 342,000 homes received notices of default in the month, up 1% from March.

In other economic news, March business inventories fell 1% after slipping 1.4% in the previous month. Economists expected inventories to have dropped 1.1%.

Company news: AIG (AIG, Fortune 500) shares declined as the company's CEO discussed restructuring plans at a House hearing about how the company plans to pay back billions in government loans. Shares rose 11.6%.

In other news, Intel (INTC, Fortune 500) was fined a record $1.45 billion by the European Union for allegedly anti competitive practices, a decision the chipmaker plans to appeal. Shares fell.

Freddie Mac (FRE, Fortune 500) posted a $9.9 billion quarterly loss after the market close Tuesday and also asked the government for another $6.1 billion in aid. Shares fell 7%.

GM (GM, Fortune 500) shares started the day with another drop on concerns that it will have to file for bankruptcy, with the stock touching $1 per share, the lowest level since 1933. But GM rallied in the afternoon to finish 6 cents higher at $1.21.

Market breadth was negative. On the New York Stock Exchange, losers topped winners eight to one on volume of 1.76 billion shares. On the New York Stock Exchange, decliners beat advancers by almost six to one on volume of 2.42 billion shares.

Bonds: Treasury prices rose, lowering the yield on the benchmark 10-year note to 3.11% from 3.17% Tuesday. Treasury prices and yields move in opposite directions.

Other markets: In global trading, Asian markets ended mixed, while European markets ended lower.

In currency trading, the dollar gained versus the euro and the yen.

U.S. light crude oil for June delivery fell 83 cents to settle at $58.02 a barrel on the New York Mercantile Exchange.

COMEX gold for June delivery climbed $2 to settle at $925.90 an ounce. To top of page

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