U.S. Stocks Mostly Lower, With Tech Bolstered By Yahoo Report

NEW YORK (MarketWatch) -- U.S. stocks tried but mostly failed to reverse course on an earlier slide, with only the tech-heavy Nasdaq Composite Index remaining higher, following a report that billionaire financier Carl Icahn might try to take over the board of Yahoo Inc.

The major indexes had slumped for much of the day, with financials greasing the slide, after Federal Reserve Chairman Ben Bernanke described financial markets as far from normal and an analyst slashed estimates for major brokers, including Merrill Lynch & Co.

"Financials are selling off again today; we saw an influential analyst cut numbers -- brokers still have downside -- and the market is just taking some profit," given its 10% climb from the bottom hit in the middle of March, said Noman Ali, portfolio manager for U.S. equities at MFC Global Investment Management.

Off its earlier lows, the Dow Jones Industrial Average was off 37.7 points, or 0.3%, to 12,838.61, with 14 of its 30 components posting losses.

Blue-chip declines were led by Hewlett-Packard Co. , recently down 5% after the technology giant said that it would acquire Electronic Data Systems Corp. for $13.9 billion to better compete with International Business Machines Corp.
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"Investors are having a hard time understanding this deal; [H-P is] buying a slower growth, lower-margin business," added Ali.

For EDS shareholders, the pending transaction is a "nice little premium," he commented.

Off the Dow, shares of EDS gained 1.1%.

In preopen trade, stock-index futures had lapsed after Wal-Mart Stores Inc. , the world's largest retailer, projected earnings that will likely fall below analysts' forecasts. .

The S&P 500 Index lost 0.73 points to 1,402.85, with financials fronting its declining sectors, off 0.1%.

In trimming her estimates for four investment firms, Oppenheimer & Co. analyst Meredith Whitney wrote that the banking giants face an outlook "far more bleak than that reflected in the market." .

Energy topped the S&P's rising sectors, up 1.5%, as crude futures climbed to a fresh record near $127 a barrel.

The Nasdaq gained 6.17 points to 2,494.66.

Shares of Yahoo climbed after CNBC said that the billionaire investor had purchased a "significant" chunk of shares in the Web portal, which recently resisted a takeover try by Microsoft Corp.

Also, shares of energy companies rose along with oil futures, which hit an all-time high of $126.98 a barrel.

On the New York Stock Exchange, advancing stocks outran those declining by a ratio of 8 to 7. On the Nasdaq, advancers ran just ahead of declining issues.

Registers ring?

The Commerce Department said that retail sales excluding motor vehicles climbed 0.5% in April, better than forecasts calling for a 0.2% gain. .

"Given all of the negative news about the consumer -- gasoline prices, home prices, labor-market conditions and availability of credit -- the strength in this report is a startling reminder of the resilience of the U.S. consumer," according to Lehman Brothers economist Drew Matus. "However, as conditions deteriorate and the likely positive effects on spending from the tax rebates over the next few months fade, we expect to see the U.S. consumer retrench."

The retail-sales report was boosted by a calendar shift that added a day's worth of shopping to the month, with a look at both March and April casting a dimmer view on the data, retail analyst Howard Davidowitz of Davidowitz and Associates said. .

Other early economic data included a Labor Department report that found import prices climbed 1.8% in April, largely in line with forecasts. .

Separately, the Commerce Department reported sales at U.S. businesses jumped 1% in March, the smallest gain in a year. .

In a speech delivered early Tuesday in Atlanta, Federal Reserve Chairman Ben Bernanke said that despite some improvements, inancial markets remain severely stressed. .

In Vancouver, Canada, San Francisco Fed President Janet Yellen sought to ease worries about inflation, telling a business group that prices have likely peaked and should be headed lower in coming months. .

In overseas trade, European shares ended slightly lower after a choppy session amid weakness in the banking sector. .

In Asia, stocks in Shanghai fell as the death toll climbed from the devastating earthquake in China. .

By Kate Gibson