(Reuters) – The Dow and S&P 500 fell on Tuesday after dismal forecasts from Home Depot and retail sales data in April indicated consumers were feeling tighter than higher prices and interest rates ahead of important debt-limiting talks.
The Commerce Department reported that retail sales rose 0.4% in April, half the speed versus an expected 0.8% increase. But the underlying trend has been strong, although the risks of a recession are rising this year.
“Retail sales data has been positive in several months, but it’s still weak,” said Jamie Cox, managing partner at Harris Financial Group.
“It basically reinforces what we saw from Home Depot this morning. You will probably see an end to the decline in retail sales, but it won’t be a smooth ride from here.”
The Dow Jones Industrial Average (.DJI) Home Depot (HD.N) fell 1.4%, hitting its lowest level in more than six months after the company lowered its annual sales forecast.
Rival Louise Companies Inc (LOW.N) shares fell 1.1 percent, while retail giant Wal-Mart fell 0.8 percent.
Data recently indicated a slowdown in the US economy, which is starting to feel the heat from the Federal Reserve’s restrictive monetary policy, and speculation about when the central bank will stop its hiking cycle has also increased.
Still, Loretta Mester, President of the Federal Reserve Bank of Cleveland, said on Tuesday that she doesn’t think the Fed has reached a point yet where it can keep interest rates steady for a while.
Major indexes started the week with modest gains, as trading was range bound amid spats in Washington between the White House and Republicans.
“As we get closer to the envisioned ‘X’ date, the market has to factor in the greater possibility of some sort of negative event happening around that, and today there was some other rhetoric from politicians that they’re no closer today than they were,” said Bryant Van Cronkiet, portfolio manager at Allspring Global Investments last week”.
Lawmakers will sit down later in the day to try to make progress on a deal to raise the $31.4 trillion U.S. government debt ceiling and avert a catastrophic economic downturn.
At 12:25 p.m. ET, the Dow Jones Industrial Average (.DJI) was down 201.12 points, or 0.60%, at 33,147.48, the S&P 500 (.SPX) was down 11.33 points, or 0.27%, at 4,124.95, and the Nasdaq The Composite Index (.IXIC) rose 25.41 points, or 0.21%, to 12,390.61 points.
Microsoft Corp (MSFT.O) rose 1.2%, extending gains for a second day and supporting the Nasdaq, after winning EU antitrust approval for its $69 billion acquisition of Activision (ATVI.O) on Monday.
Horizon Therapeutics (HZNP.O) fell 15.0% as the Federal Trade Commission is expected to file a lawsuit to block Amgen Inc’s (AMGN.O) $27.8 billion deal to buy the company. Amgen shares fell 1.0 percent.
The Nasdaq Biotechnology Index (.NBI) fell 2.3%, hitting its lowest level in nearly three months.
Shares of Capital One Financial Corp. (COF.N) jumped 2.4%, rallying further on the S&P 500, after Berkshire Hathaway Inc (BRKa.N) revealed Monday that it had begun investing in the consumer lender.
Berkshire also raised its stake in HP Inc (HPQ.N), sending its shares up 1.1%, while shedding its stake in regional bank US Bancorp (USB.N), which fell 2.5%.
Declining issues outnumbered advancers by 3.39 to 1 on the NYSE and 1.89 to 1 on the Nasdaq.
The S&P posted eight new highs in 52 weeks and 11 new lows, while the Nasdaq recorded 37 new highs and 131 new lows.
Additional reporting by Shriyashi Sanyal in Bengaluru; Edited by Magu Samuel
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