S&P 500, Dow fall, dragged by Home Depot outlook, US retail sales

By Chuck Mikolajczak

NEW YORK (Reuters) – The Dow and the retreated on Tuesday after a disappointing forecast from Home Depot (NYSE:) and U.S. retail sales data for April pointed to softer consumer spending, while uncertainty about interest rates and debt limit negotiations weighed on sentiment.

Home Depot shed 1.73%, the biggest drag on the Dow Industrials and among the heaviest weights on the S&P 500 after the home improvement retailer cut its annual sales forecast and projected a steeper-than-expected decline in profit. Shares of peer Lowe’s Companies Inc (NYSE:) fell 1.38%.

“You can argue that people are tired of spending on the house, they want experiences, they want to go out they want to do other things, they don’t want to fix up the house according to Home Depot, because they had horrendous earnings,” said Ken Polcari, managing partner at Kace Capital Advisors in Boca Raton, Florida.

The Commerce Department reported retail sales rose 0.4% in April, short of the estimate for an increase of 0.8%. But core retail sales rebounded, a figure excluding automobiles, gasoline, building materials and food services.

“There is a sense that people are starting to get a little bit more sensitive to the Fed being successful and this ongoing drama of the debt ceiling is causing angst.”

The fell 278.42 points, or 0.83%, to 33,070.18, the S&P 500 lost 16.85 points, or 0.41%, to 4,119.43 and the added 9.92 points, or 0.08%, to 12,375.13. The Nasdaq held slight gains, in part due to a 5.49% jump in Advanced Micro Devices (NASDAQ:) after Third Point LLC disclosed a stake in the company.

Recent data has indicated slowing in the U.S. economy following several rate hikes by the Federal Reserve to fight high inflation,. That slowing along with recent negotiations over the U.S. debt ceiling has focused attention on when the central bank will pause hiking, or cut interest rates.

While the market is currently pricing in a rate hike by the end of the year, recent comments from Fed officials suggested they are not willing to cut rates soon.

Richmond Fed President Thomas Barkin said he was “comfortable” with raising interest rates further if needed, but liked the “optionality” implied in the latest policy statement.

Cleveland Fed President Loretta Mester said she does not think the central bank can hold interest rates steady yet.

Lawmakers were scheduled to meet to work on a deal to raise the U.S. government’s $31.4 trillion debt ceiling, with Democratic President Joe Biden and top congressional Republican Kevin McCarthy expected to discuss new work requirements for benefits programs for low-income Americans.

Horizon Therapeutics (NASDAQ:) tumbled 15.35% as the Federal Trade Commission was expected to file a lawsuit to block Amgen Inc (NASDAQ:)’s $27.8 billion deal to buy the company. Shares of Amgen fell 1.89%.

The Nasdaq Biotech Index fell 2.51% , hitting its lowest in three weeks, on pace for its biggest daily percentage drop in three months.

Shares of Capital One Financial Corp (NYSE:) climbed 2.44% the day after Berkshire Hathaway (NYSE:) Inc disclosed it had taken a stake of nearly $1 billion in the stock.

Declining issues outnumbered advancing ones on the NYSE by a 3.56-to-1 ratio; on Nasdaq, a 2.04-to-1 ratio favored decliners.

The S&P 500 posted 10 new 52-week highs and 12 new lows; the Nasdaq Composite recorded 42 new highs and 163 new lows.