Stocks Maintain Downward Drift - TheStreet

Stocks Maintain Downward Drift

Wal-Mart and Hewlett-Packard weigh on the Dow. And crude oil hits a new intraday high, as investors digest the latest Fed comments.
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Updated from 10:56 a.m. EDT

Stocks in the U.S. were sagging Tuesday as investors digested a cautious outlook at

Wal-Mart

(WMT) - Get Report

, the return of surging oil futures, and sobering words on the liquidity crisis from

Federal Reserve

chairman Ben Bernanke.

The

Dow Jones Industrial Average

surrendered 66 points to 12,810, pressured both by Wal-Mart and its worst-performing component of the day,

Hewlett-Packard

(HPQ) - Get Report

. The

S&P 500

was off 3 points at 1401, and the

Nasdaq Composite

was slipping 7 points at 2481.

"It seems like people are on hold to see whether we'll actually see the second-half recovery occur," said Charles Rotblut, senior market analyst with Zacks Investment Research. "We're entering a period without a lot of catalysts. Earnings season is over, and the Fed is on hold at least until August."

"We're in no-man's land," said Fred Dickson, senior vice president and market strategist with D.A. Davidson. "Little incremental news items have what appear to be fairly significant intraday market impact, but when you look at it over four or five days, they cancel each other out."

Dickson added that that there isn't enough good news to push investors on the buy side much higher, and further drags remain in stubbornly high oil prices and the weak U.S. dollar.

"Overall, investor confidence seems very, very low," he said. "The real good news is that we haven't seen big drops on light volume, and typically that's what we'll see in a really crummy market." He noted that that excludes "occasional" drops like the one that occurred Friday, which was, at any rate, followed by a Monday bounce-back.

Also weighing on investors Tuesday were Bernanke's comments at an Atlanta Fed conference this morning. The central-bank chief said that, despite some "welcome signs" that liquidity turmoil is abating, "at this stage conditions in financial markets are still far from normal."

Bernanke cited several justifications for that assessment, including the fact that a number of "moribund" securitization markets remain, that risk spreads are still "quite elevated," and that pressures persist in short-term funding markets.

"Ultimately," he said, "market participants themselves must address the fundamental sources of financial strains -- through deleveraging, raising new capital, and improving risk management --and this process is likely to take some time."

At the same time, crude oil jumped to a new intraday high of $126.98 a barrel before easing to $126.52, a gain of $2.29. Gold futures sank $12.30 to $872.60 an ounce.

The U.S. dollar's earlier gains were deflating a bit, but the greenback still recently firmed by 0.2% against the euro at $1.5503. Against the yen, the dollar added 0.6% to 104.48.

On the corporate front, Wal-Mart's current-quarter outlook leaned to the lower end of expectations, even as its first-quarter profit grew by 6.9% to a better-than-expected $3.02 billion, or 76 cents a share. Shares dropped 1.6%.

Still, the Commerce Department appeared to provide some early support after reporting that retail sales, excluding cars, swelled by 0.5% in April, compared with the 0.2% economists' consensus. March data were revised upward to 0.4%. Keeping in the effects of declining auto sales, the numbers showed a drop of 0.2%, as expected.

Meanwhile, Hewlett-Packard confirmed that it will acquire

Electronic Data Systems

(EDS)

. H-P said it will pay $13.9 billion in cash, or $25 a share, nearly a billion higher than the top end of the range cited by news reports yesterday. H-P shares slid 6.6% as EDS -- which surged in the prior session -- climbed another 1.5% even though the stock was downgraded by at least three analysts.

Elsewhere in tech,

Research In Motion's

(RIMM)

price target was boosted by both Citigroup and Oppenheimer a day after the company unveiled its new BlackBerry Bold, a possible rival to

Apple's

(AAPL) - Get Report

iPhone. Still, RIMM shares were stepping back 1.4%, in retreat from some of Monday's robust gains.

In other research calls, Oppenheimer cut its second-quarter, fiscal 2008 and fiscal 2009 earnings estimates on

Goldman Sachs

(GS) - Get Report

,

Merrill Lynch

(MER)

,

Lehman Brothers

(LEH)

and

Morgan Stanley

(MS) - Get Report

, in part because of expected revenue reversals that will be required by a new accounting treatment. Shares of these names were losing between 0.7% and 3.2%.

Elsewhere,

Liz Claiborne

(LIZ)

shares moved up 1.1% after the clothing designer said adjusted earnings came to 28 cents a share in the first quarter, flying past the dime-a-share average Street target from Thomson Reuters. Including heavy restructuring costs, the company swung to a continuing-operations loss of 16 cents a share.

Also, after the prior close

Sirius Satellite Radio

(SIRI) - Get Report

reported a top line that came in

a hair below estimates

even as its narowed loss matched expectations. Also, in the earnings call, CEO Mel Karmazin voiced frustration in with the time it has taken the Federal Communications Commission to review its proposed merger with

XM Satellite Radio

(XMSR)

.

Sirius shares were off 0.7%; XM, which reported a

widened loss

Monday, ticked up 0.7%.

Returning to economic data, the Commerce Department said business inventories were up 1% sequentially in March, or 6.3% higher year over year. It should take 1.27 months -- virtually the same as last year -- to work through that inventory based on current sales data.

Also, the Labor Department said import prices, excluding the volatile effects of oil, were up 1.1% in April -- the same as the prior month. Stripping out agricultural products, export prices ticked up 0.6%, or less than half the growth seen in March.

Treasury prices were sliding. The 10-year note was off 15/32 in price to yield 3.86%, and the 30-year bond shed 22/32 in price, yielding 4.58%.

Foreign markets were mainly higher. In Asia, Tokyo's Nikkei 225 ramped up 1.5% overnight, and Hong Kong's Hang Seng Index leaped 2%. As for Europe, Germany's Xetra Dax rose 0.3% and the Paris Cac tacked on 0.5%. London's FTSE 100 gave up 0.1%.