Stocks declined Tuesday after Wal-Mart issued a disappointing outlook and a well-known analyst slashed her earnings forecast for big brokers.
The top three decliners on the Dow were: Hewlett-Packard , Wal-Mart and JPMorgan .
Offering a brief glimmer of hope before the market open was the retail-sales report, which showed surprising resilience in sales excluding autos. Retail sales fell 0.2 percent, as expected, in April but excluding autos, sales jumped 0.5 percent. A lot of that strength came from sales of building materials, which gained 1.9 percent, and general merchandise, which rose 0.5 percent.
"Even before the rebate checks hit the mail, households continue spend," Joel Naroff, of Naroff Economic Advisors, wrote in a note to clients. "While much of the rebates will probably go to savings and paying down debt rather than new spending, over the next four to six months, it will help sustain consumer demand to some extent. That could keep us out of a negative quarter."
A separate report showed import prices jumped 1.8 percent, while export prices ticked up 0.3 percent as agriculture and food-export prices slipped.
Business inventories expanded just 0.1 percent in March, after a revised 0.5 percent increase in February; economists had expected a bigger 0.4 percent rise. Manufacturers saw some of the biggest builds, while retailers and auto dealers pared inventories. Business sales rose 1 percent, after falling by the same amount a month earlier.
The median value of existing U.S. single-family home sales in metropolitan areas fell 7.7 percent in the first quarter from the year-earlier period, the National Association of Realtors reported. Total state existing-home sales fell 22.2 percent from a year ago.
Oil blew threw its latest ceiling -- and it's only Tuesday -- to nearly $127 a barrel. That follows its dizzying $10 ascent last week that saw it briefly cross the $126 mark. The dollar rose broadly against other currencies, helped by the core retail sales gain.
Oppenheimer analyst Meredith Whitney again cut her earnings estimates for some big brokersbased on a weaker outlook for capital markets and sizable estimated revenue reversals due to an accounting rule that lets companies elect to use fair value for certain assets and liabilities.
Whitney cut estimates on: Goldman Sachs
Earlier, Wal-Mart reported its profit rose 7 percentbut shares slipped as the company's tepid outlook for the second quarter unnerved traders.
Wal-Mart executives said the outlook for the rest of this year is uncertain and, for the second time in under a week, pointed out that consumers are having a harder time stretching their paychecks and many are running out of money at the end of the month.
Still, Goldman Sachs retail analyst Adrianne Shapira said Wal-Mart's report shows its best positioned to weather the slowdown and said Wal-Mart's conservative projections -- which don't factor in the impact of tax-rebate checks -- were a good thing.
"We believe setting an achievable and potentially beatable bar in today's tough environment is the prudent way to provide guidance," Shapira wrote in a note to clients.
Meanwhile, TJX , which operates the TJ Maxx and Marshalls discount-clothing chains, saw its profit rise nearly 20 percent amid an easy year-earlier comparison and as cash-strapped consumers scooped up the chains' bargains. Sales increased 6 percent to $4.36 billion, while same-store sales rose 3 percent.
The company forecast second-quarter earnings of 40 to 42 cents a share and a 3 percent rise in same-store sales; analysts expect 42 cents a share, according to Reuters Estimates.
In deals, Hewlett-Packard, the world's largest personal-computer maker, confirmed that it's close to a deal to buy technology outsourcing company Electronic Data Systems for $12 billion to $13 billion.
An EDS acquisition would make H-P No. 2 in IT services behind IBM , but IBM shares rose for a second day as analysts said H-P was paying a hefty premium for a slow-growing business.
H-P reported better-than-expected preliminary quarterly results today and raised its fiscal 2008 outlook, but 2008 won't include any impact from the EDS deal. Going forward, an acquisition of EDS is expected to help more htan double H-P's services revenue, which amounted to $16.6 billion in fiscal 2007.
Office-supplies retailer Staples raised its hostile offer for Corporate Express by more than 10 percent, valuing its target at about 1.5 billion euros ($2.3 billion), and said the Dutch business products wholesaler was still refusing to talk.
And Italy's Finmeccanica reached a $5.2 billion deal to buy DRS Technologies , securing itself a bigger presence in the growing U.S. defense market.
TUESDAY: Earnings from Electronic Arts and Whole Foods; Bernanke, other Fed officials speak; Virginia primary
WEDNESDAY: CPI; mortgage applications; crude inventories; Earnings from Freddie Mac, Deere, Macy's and Sony; Fed's Yellen speaks
THURSDAY: Jobless claims; Philly and NY Fed surveys; industrial production; Earnings from Blockbuster, JCPenney, H-P and Kohl's
FRIDAY: Housing starts; consumer sentiment
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