U.S. Stocks Open Lower As Home Depot, Sears Warn
NEW YORK (MarketWatch) -- U.S. stocks opened lower on Tuesday, with investor enthusiasm hit right at the outset of earnings season after both Home Depot Inc. and Sears Holdings lowered their forecasts.
A 1 p.m. eastern speech by Federal Reserve Chairman Ben Bernanke on inflation also kept investors cautious.
The Dow Jones Industrial Average fell 63 points at 13,586, as 25 of its 30 components fell, led by its financial shares, JP Morgan Chase , American Express Co. , and Citigroup Inc. .
General Motors was among the few shares bucking the trend, rising 1.5%, thanks to a new upgrade from J.P. Morgan.
The S&P 500 fell 12 points to 1,519, while the Nasdaq Composite dropped 19 points to 2,650.
Sears fell 6.7% after forecasting second-quarter profit will decline amid sales drops at both its Kmart discount chain and Sears department store.
Dow component Home Depot , however, rose 0.6%. Even though it lowered earnings forecasts, the company launched a tender offer for 250 million of its shares.
The retailer early Tuesday cut its 2007 profit forecast, saying the soft U.S. housing market is bruising earnings more than management had anticipated just two months ago.
On Monday, the Dow industrials got within striking distance of a record close. But stocks closed off their highs, although still higher on the day.
On Tuesday the market's attention turns to concerns about the second-quarter earnings season, which kicked off after Monday's close with Alcoa Inc's earnings report. The aluminum producer's earnings slipped, but matched analysts' expectations, while revenue was stronger than expected.
A report in a U.K. newspaper also said that BHP Billiton Ltd. is in talks with private equity firms to put together a bid for Alcoa.
However, the profit warnings from Home Depot and Sears kept the broader market in a bleak frame of mind.
"We'll probably focus on the kickoff of earnings season, which was less than spectacular with Aloca," said Art Hogan, chief market strategist at Jefferies & Co. "I don't think that piece of the puzzle will give us any positive momentum."
"But the major driver today will be Ben Bernanke.," he said. "I think we will trade stock by stock until the speech."
Bernanke's speech, scheduled for 1 p.m., is widely expected to stress inflation. Recent Fed speakers have made clear that the Fed remains focused chiefly on inflation, which signals to the market that the central bank is unlikely to cur interest rates and even may consider raising rates.
Wholesale trade figures for are due at 10 a.m. The MarketWatch forecast, based on a survey of economists, is for a 0.3% increase, which would match the gain seen in April.
Other markets
Treasurys were higher in early trade, pushing yields below recent highs, ahead of Bernanke's speech. If the chairman stresses inflation a good deal, his remarks could spark a Treasury selloff in the afternoon.
The benchmark 10-year note last was up 7/32 at 95-9/32 with a yield of 5.114%.
The dollar was weaker ahead of Benanke. But if Bernanke stresses inflation heavily, the dollar should benefit.
The euro was up 0.3% against the dollar at $1.3654,while the dollar was down .02% against the yen at 123.02 yen. The pound was up 0.08% at $2.0167.
Commodities were under pressure in the early going, baking off recent highs. The August crude contract last was down 20 cents at $71.99 a barrel, while the front-month gold contract feel 20 cents to $662.30 an ounce.
By Leslie Wines