Weak economic data pushed stocks sharply lower Tuesday, along with a bounce in oil prices. Traders also eyed results from retailers Home Depot, Staples and Target.
The fates of mortgage financiers Fannie Mae (FNM) and Freddie Mac (FRE) remain a market concern. Freddie managed to stage a successful auction of $3 billion in five-year notes on Tuesday.
On Tuesday, the Dow Jones Industrial Average fell 130.84 points, or 1.14%, to finish at 11,348.55. The broader S&P 500 fell 11.92 points, or 0.93%, to end the session at 1,266.68. The tech-heavy Nasdaq composite shed 32.62 points, or 1.35%, to close at 2,384.36.
Trading was slow, with 23 stocks in negative territory on the New York Stock Exchange for every nine moving higher. The ratio was 20 to 8 negative on the Nasdaq.
The U.S. producer price index surged 1.2% in July, with the core rate (excluding food and energy) up 0.7%. Price increases were much stronger than expected, raising inflation fears.
Also, U.S. housing starts plummeted 11% in July to an annual rate of 965,000, the slowest pace of new house construction since March, 1991.
Dallas Fed President Richard Fisher said in a speech Tuesday that policymakers must be poised to act if slowing growth fails to curb inflation. He acknowledged that housing has still not hit bottom and the credit markets "remain tempestuous."
Target Corp. (TGT) posted earnings of 82 cents per share, vs. 80 cents a year ago, as sales rose 5.7%. The earnings figure beat Wall Street expectations. Same-store sales fell 0.4%, and gross profit margins narrowed as shoppers purchased less profitable discount items.
Home Depot (HD) reported earnings of 71 cents per share, vs. 77 cents a year ago. Same-store sales dropped 7.9% and total sales fell 5.4%. Home Depot believes next year sales will fall about 5% and earnings will decline 24%. A Morgan Keegan analyst upgraded the stock from underperform to market perform.
Staples (SPLS) says it saw challenging market conditions and weaker than expected results last quarter. Sales rose about 3%, while earnings fell about 15% from a year ago, the firm said.
The price of oil moved higher Tuesday after press reports that South America's biggest oil producer, Venezuela, said it will propose that OPEC cut oil output quotas if crude prices continue to fall. On the NYMEX, crude oil for September delivery was up $1.66 to $114.53 per barrel.
Among other stocks in the news Tuesday, CME Group (CME) says it won approval for its acquisition of NYMEX Holdings (NMX), according to preliminary results from the votes of both firms' shareholders.
General Dynamics (GD) plans to buy Jet Aviation for about $2.25 billion in cash.
Medtronic (MDT) posted earnings of 72 cents per share, vs. 62 cents a year ago. Revenue rose 19%, with sales outside the U.S. accounting for 39% of the firm's revenue.
Dick's Sporting Goods (DKS) was reportedly upgraded by a Baird analyst from neutral to outperform.
Federated Investors (FII) declared a special cash dividend of $2.76 per share, bringing total third quarter payments to $3 per share. Also, Federated's board authorized a new plan to buy back 5 million shares.
Saks Inc. (SKS) posted a loss of 23 cents per share, vs. a 17 cents loss a year ago. Same-store sales fell 4%, while total sales dipped 3.6%.
Major European stock indexes finished sharply lower Tuesday. In London, the FTSE 100 index was off 2.38% to 5,320.40. In Paris, the CAC 40 index fell 2.61% to 4,332.79. Germany's DAX index slid 2.34% to 6,282.43.
Major Asian indexes also fell. Japan's Nikkei 225 index lost 2.28% to 12,865.05. In Hong Kong, the Hang Seng index dropped 2.13% to 20,484.37.
Treasury market
Treasuries were lower in price Tuesday. The 10-year Treasury note slid 05/32 at 101-12/32 for a yield of 3.83%, while the 30-year bond fell 14/32 to 100-21/32 for a yield of 4.46%.