Trading Session Is Off to a Woeful Beginning

All three major indices are losing ground amid disheartening inflation data for April. And investors weigh the latest earnings results from retailers Home Depot and Staples.
By Sarina Penn ,

Updated from 9:20 a.m. EDT

Stocks in the U.S. were falling at the open Tuesday after a crucial inflationary index came in warmer than expected.

The

Dow Jones Industrial Average

sank 82 points to 12,946, and the

S&P 500

surrendered 6 points to 1420. The

Nasdaq Composite

was off 13 points at 2503.

The declines came after the Labor Department said that prices of goods at the wholesale level, excluding the volatile effects of energy and food, rose 0.4% in April from the prior month. That's double the 0.2% increase that economists were expecting, and also twice the price pickup of the prior month. The core index was up 3% in April from the year before, the biggest gain since December 1991 and topping the 2.8% high set in July 2005.

Still, wrote Ian Shepherdson, chief U.S. economist with High Frequency Economics, "Over time, core finished goods prices follow core raw materials, where the

year-over-year rate of increase, 24.6%, sounds alarming but is consistent with 2%

year-over-year core finished goods a year from now. Not much to worry about."

The overall producer price index registered a 0.2% price rise from the prior month, half the consensus estimate and down sharply from March's 1.1% jump.

Tony Crescenzi, chief bond market strategist with Miller Tabak and contributor to

RealMoney.com

, a sister site to

TheStreet.com

, said, "The only solace in these horrendous figures is the fact that the financial markets have already largely digested the idea that producer prices are rising rapidly, a fact that can't be missed when watching commodities prices on a day-to-day basis."

On the corporate side, Dow component

Home Depot

(HD) - Get Report

said its

first-quarter profit

plunged by two-thirds to $356 million, or 21 cents a share, as the home-improvement goods retailer continued to suffer from housing-sector woes. Excluding a one-time charge related to store closings and paring back of store-growth plans, earnings came to a better-than-expected 41 cents a share, but shares slumped 3.5% in the premarket.

Last time out, stocks couldn't sustain a big afternoon rally following a better-than-expected report of leading economic indicators, and equity measures finished mixed amid a resurgence of oil prices.

All told, on Monday, the Dow added 41 points to 13,026, and the S&P 500 crept up 1 point to 1428. The Nasdaq close down 13 points at 2516.

Back in corporate news, office-supplies retailer

Staples

(SPLS)

, meanwhile, said its profit picked up a bit to $212 million in its most recent quarter as the company benefited from its international exposure.

That came a day after Staples went hostile with its bid for Dutch-based

Corporate Express

, bringing a takeout offer of $2.34 billion (1.5 billion euros) straight to the company's shareholders with its claim that Corporate was unwilling to negotiate a transaction. Staples shares rose 1.4% in early trading.

Elsewhere, last night Standard & Poor's cut

Fannie Mae

(FNM)

risk-to-the-government ranking, though the ratings agency upheld Fannie's ratings for senior unsecured debt, subordinated debt, and preferred stock. Shares were down 1.2%.

Among commodities, crude oil was adding 45 cents to $127.50 a barrel, and gold futures were up $2 to $907.80 an ounce. The U.S. dollar fell 0.9% against the euro at $1.5647 while weakening by 0.6% against the yen to 103.67.

Treasury prices were on the rise. The 10-year note added 8/32 in price to yield 3.80%, and the 30-year bond was up 15/32 in price, yielding 4.54%.

Overseas markets were mostly losing ground. Tokyo's Nikkei 225 shed 0.8% overnight, and the Hang Seng Index in Hong Kong sank 2.2%. In Europe, London's FTSE 100 was sliding 1.8%, and Germany's Xetra Dax gave up 1.1%. The Paris Cac was falling 1.5%.

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