honoluluadvertiser.com

Sponsored by:

Comment, blog & share photos

Log in | Become a member
The Honolulu Advertiser

Posted at 6:41 a.m., Tuesday, August 14, 2007

Wall Street lower after disappointing Wal-Mart results

Associated Press

NEW YORK — Wall Street pulled back sharply today on anxiety about the pace of consumer spending amid disappointing results from Wal-Mart Stores Inc. Speculation that yet another fund is struggling because of weeks of market volatility added to the decline.

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

Exacerbating investors' nervousness were several media reports that money market fund Sentinel Management Group has been having difficulties meeting redemptions for investors, and has asked the government permission to halt them. A telephone call to the company was not immediately returned.

Hedge funds and other big institutional investors have taken a beating in recent weeks due to the market turbulence. On Monday, Goldman Sachs Group Inc. said three funds it manages have had significant losses — and infused $3 billion in capital into one of them.

Wall Street has been pummeled as a deepening credit crunch has spooked the market, and led to anxiety about potential losses at financial firms and funds. The Federal Reserve, which has injected some $64 billion of liquidity into the U.S. banking system since Thursday, said today it stood ready to act again should market conditions warrant.

"The market is very, very sensitive at this point, and any news about a potential financial problems is going to affect the way that the market trades," said Scott Fullman, director of investment strategy for I.A. Englander & Co. "We've been seeing extreme sensitivity in the financials, but also in the consumer stocks and industrials during the session."

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

In midday trading, the Dow Jones industrial average fell 91.04, or 0.69 percent, to 13,145.49. The benchmark index had fallen as much as 178 points in earlier trading.

Broader stock indicators were lower. The Standard & Poor's 500 index shed 10.29, or 0.71 percent, at 1,442.63, and the Nasdaq composite index fell 18.30, or 0.72 percent, at 2,523.94.

Bonds rose, with the yield on the benchmark 10-year Treasury note falling to 4.75 percent from 4.78 percent late Monday. The fixed-income market has risen as stock investors move into securities deemed less volatile.

Stocks originally were lifted in early trading on government data that indicated that inflation remains in check. But, that gave way to further concerns about consumer spending and widening credit worries.

The Labor Department said wholesale prices rose in July for the fifth time in six months. 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 U.S. trade deficit fell to a four-month low in June. The deficit dropped to $58.1 billion in June, a 1.7 percent decrease from May and the lowest imbalance since February.

Mike Malone, a trading analyst at Cowen & Co., said the reports did add some stability to a market that has seen triple-digit swings last week. Much of that has had to do with the role of central banks in pumping more liquidity into the market.

But, "there is still a tremendous amount of risk out there," he said.

Among the hardest hit sectors today are financial services stocks, which have been sliding as worries mounted that subprime loan trouble could spread to other parts of the economy. Major investment banks have reported losses linked to mortgage-backed securities.

Goldman Sachs fell $6.75, or 3.8 percent, to $170.75 — extending losses from Monday when it announced its hedge funds were hurt by volatile markets. Bear Stearns Cos., which earlier this summer disclosed that two of its funds were all but wiped out, fell $1.44 to $108.16.

Retail stocks were also hit after Wal-Mart, one of the 30 stocks included in the Dow, lowered its profit forecast amid weak economic conditions that it blames for hurting consumer spending globally. The retailer said some of its customers were straining under economic pressures such as higher oil prices.

Wal-Mart shares tumbled $2.39, or 5.2 percent, to $43.78.

Home Depot, the world's largest home improvement store chain, warned that it expects profit to decline for fiscal 2007 because of a sluggish housing sector. Shares fell 98 cents, or 2.78 percent, to $34.26.

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 Mattel's second big recall of Chinese-made toys in two weeks.

Declining issues outpaced advancers by a 2 to 1 basis on the New York Stock Exchange, where volume came to 682.4 million.

Light, sweet crude rose 43 cents to $72.05 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 fell 6.09, or 0.78 percent, to 773.72.

Overseas, Japan's Nikkei stock average rose 0.27 percent. Britain's FTSE 100 fell 0.10 percent, Germany's DAX index slipped 0.52 percent, and France's CAC-40 fell 0.82 percent.