US stocks drop on poor retail earnings

THE Dow and the S&P 500 fell for a third day yesterday after disappointing figures from Wal-Mart and Hewlett-Packard, although a late rebound suggested investors may be looking for a short-term bounce.

Both the S&P 500 and Nasdaq dipped below their 50-day moving averages, but those levels appeared to bring in buying interest.

Recent weakness in sectors tied to economic growth and the sharp decline in commodities have spurred talk of a prolonged pullback.

Short-term traders see an opportunity, judging by late gains in certain energy names and financials’ strong performance yesterday.

The cyclical stocks are “easy to buy out there. We’re not having any trouble buying them for clients,” said Kevin Kruszenski, head of listed trading at KeyBanc Capital Markets in Cleveland.

“There will be a tradeable bounce, but it still feels like they are under distribution,” he said, using traders’ parlance for selling.

Lately investor concern has centered around lacklustre economic figures. Wal-Mart Stores, the nation’s largest retailer, said same-store sales have now fallen for two years.

“Earnings from blue chips as well as data are showing evidence of an economic slowdown,” said Chad Morganlander, a portfolio manager at Stifel Nicolaus & Co in Florham Park, New Jersey. “Early evidence of deterioration within the US consumer is showing in numbers from Hewlett-Packard and Wal-Mart.”

HP, the world’s largest technology company, tumbled 7.3 per cent to $36.91 after cutting its forecast due to problems stemming from Japan’s earthquake and soft PC sales.

The Dow Jones industrial average dropped 68.79 points, or 0.55 per cent, to 12,479.58.

The Standard & Poor’s 500 Index dropped a mere 0.49 of a point, or 0.04 per cent, to 1,328.98. But the Nasdaq Composite Index gained 0.90 of a point, or 0.03 per cent, to 2,783.21.