U.S. Stocks Lower Amid Bleak Retail Sales

NEW YORK (MarketWatch) -- U.S. stocks fell firmly on Thursday, as retailers, including Wal-Mart Stores Inc., reported worse-than-expected declines in April sales, which were blamed on the weather and the timing of the Easter holiday.

Yet, investors are likely to question whether the weaker sales reflect a slowing economy and falling consumer confidence amid a falling housing market and high energy prices.

News that the trade deficit widened sharply in March, after improving over the past six months, also added to the pressure. The deficit could lead to a downward revision of first-quarter growth to below 1%.

The Dow Jones Industrial Average was down 47 points at 13,316, led by declines in shares of Alcoa Inc. , Dupont and Exxon Mobil Corp. .

Also among blue chips, Wal-Mart fell 0.1%. The giant retailer earlier said April sales were down 3.5%. Analysts expected a 1.1% drop.

Overall, Thomson Financial was forecasting that April same-store sales would rise 0.4% compared with 6.5% in the same period last year.

The long list of other retailers that missed forecasts for April sales include Gap , J.C. Penney , Federated , AnnTaylor Stores , Nordstrom , Pacific Sunwear , New York & Co. , Limited Brands , Abercrombie & Fitch .

Among other Dow components, Merck fell 1.2% after an editorial in the New England Journal of Medicine recommended a cautious approach toward Merck's cervical cancer vaccine, Gardasil.

American International Group dropped 0.4% ahead of reporting earnings after the close.

The S&P 500 fell 6.8 points to 1,505, while the Nasdaq Composite fell 12.1 points to 2,564.

Trading volume showed 454 million exchanging hands on the New York Stock Exchange and 610 million on the Nasdaq stock exchange. Declining issues outpaced gainers by 20 to 9 on the NYSE and by 19 to 8 on the Nasdaq.

By sector, banks , gold and biotechnology led the declines, while airlines were among the few sectors rising.

Economy back in focus?

After being put on the backburner during the first-quarter earnings season, investors may again pay attention to signs of a slowing economy.

On Wednesday, the Federal Reserve left interest rates unchanged and referred to the slowing economy in its accompanying statement, even as it said inflation remained its number one concern.

But news that the U.S. trade deficit widened sharply in March could revive economic concerns. The deficit could lead to a downward revision of the already low first-quarter gross domest product to below 1%, according to Action Economics.

Other markets

The Bank of England hiked interest rates for the fourth time since August, while the European Central Bank kept interest rates unchanged, while hinting at a June hike.

The dollar rose against major rivals, even after the deficit numbers, following a drop in weekly U.S. jobless claims.

Crude oil futures rose 56 cents to $62.11 a barrel.

Gold futures dropped $6.70 to $675.80 an ounce

Share movers

The Gap dropped 2.3% after reporting weaker than expected April sales.

Whole Foods tumbled 8% after reporting a profit decline and slowing same-store sales growth.

Rio Tinto fell 5.4% after Wednesday's rally from hopes that BHP Billiton will buy it, as the stock cooled in London and Sydney trade on Thursday.

By Nick Godt