Dow, S&P 500 fall as Home Depot, retail sales data weigh

By Shreyashi Sanyal and Shristi Achar A

(Reuters) – The Dow and the fell on Tuesday after a dour forecast from Home Depot (NYSE:) and April retail sales data pointed to consumers feeling the pinch from rising prices and interest rates, ahead of crucial debt limit talks.

The Commerce Department reported retail sales rose 0.4% in April, at half the pace against an expected increase of 0.8%. But the underlying trend was solid, despite growing risks of a recession this year.

“The retail sales data has been positive in several months, but it’s still weak,” said Jamie Cox, managing partner at Harris Financial Group.

“It basically reinforces what we saw from Home Depot this morning. You are probably seeing the end of the decline in retail sales, but it’s not going to be a smooth ride from here.”

component Home Depot shed 1.4%, hitting its lowest level in over six months after the company lowered its annual sales forecast.

Shares of rival Lowe’s Companies Inc (NYSE:) fell 1.1%, while retail giant Walmart (NYSE:) Inc slipped 0.8%.

Data recently has pointed to a slowing U.S. economy, which is starting to feel the heat from the Federal Reserve’s restrictive monetary policy, and also heightened expectations for when the central bank will pause its hiking cycle.

Cleveland Fed President Loretta Mester, however, said on Tuesday that she does not think the Fed is at a point yet where it can hold interest rates steady for a period of time.

The main indexes started the week with modest gains, as trading was range-bound amid a wrangling in Washington between the White House and Republicans.

“As we get closer to the perceived ‘X’ date, the market has to price in greater probability of some sort of negative event around that, and today there was some further rhetoric from politicians that they’re no closer today than they were maybe last week,” said Bryant VanCronkhite, portfolio manager at Allspring Global Investments.

The lawmakers will sit down later in the day to try to make progress on a deal to raise the U.S. government’s $31.4 trillion debt ceiling and avert an economically catastrophic default.

At 12:25 p.m. ET, the Dow Jones Industrial Average was down 201.12 points, or 0.60%, at 33,147.48, the S&P 500 was down 11.33 points, or 0.27%, at 4,124.95, and the was up 25.41 points, or 0.21%, at 12,390.61.

Microsoft Corp (NASDAQ:) rose 1.2%, extending its gains to a second day and boosting the Nasdaq, after winning EU antitrust approval for its $69 billion acquisition of Activision on Monday.

Horizon Therapeutics (NASDAQ:) plunged 15.0% as the Federal Trade Commission is expected to file a lawsuit to block Amgen Inc (NASDAQ:)’s $27.8 billion deal to buy the company. Shares of Amgen fell 1.0%.

The Nasdaq Biotech Index fell 2.3%, hitting its lowest level in nearly three months.

Shares of Capital One Financial Corp (NYSE:) jumped 2.4%, rising the most on the S&P 500, after Berkshire Hathaway (NYSE:) Inc on Monday disclosed it has begun investing in the consumer lender.

Berkshire also upped its stake in HP Inc (NYSE:), sending its shares up 1.1%, while shedding stake in regional bank US Bancorp (NYSE:), which dipped 2.5%.

Declining issues outnumbered advancers for a 3.39-to-1 ratio on the NYSE and for a 1.89-to-1 ratio on the Nasdaq.

The S&P index recorded eight new 52-week highs and 11 new lows, while the Nasdaq recorded 37 new highs and 131 new lows.