Wall St down as US retailers disappoint

Trader Thomas Ferrigno, left, works on the floor of the New York Stock Exchange. File photo / AP

Wall Street fell as US retailers including Staples reported earnings that underpinned concern about the pace of growth in corporate profits.

With about an hour of trading left in the day in New York, the Dow Jones Industrial Average shed 0.67 per cent, the Standard & Poor's 500 Index fell 0.58 per cent, while the Nasdaq Composite Index dropped 0.60 per cent.

Slides in shares of Caterpillar, down 2.5 per cent, and AT&T, down 1.9 per cent, led the Dow lower. Bucking the trend were shares of Home Depot, up 2.5 per cent for the largest percentage gain in the Dow, after the company said May sales were "robust".

Not all were encouraged by Home Depot's sales amid concern, shared by US Federal Reserve Chairman Janet Yellen, about the strength of the recovery of the American housing market.

"We remain neutral as we worry that a weaker housing market will impact sales as the year progresses," Janney Capital Markets analyst David Strasser wrote in a note, Reuters reported.

Federal Reserve Bank of New York President William Dudley said that the industry is facing "several significant headwinds."

"On the housing side, residential investment has stalled out over the past few quarters. Although I expected some slowing due to the rise in mortgage rates in the middle of 2013, the extent of the slowdown has surprised me given that the recent pace of housing starts-roughly 1 million per year-is far below what is consistent with the economy's underlying demographic trends," Dudley said in remarks for the New York Association for Business Economics.

"I think housing has been weaker than anticipated because several significant headwinds persist for this sector," Dudley said.

Meanwhile, several US retailers disappointed on the earnings front.

Shares of Staples sank, last down 13 per cent, after the company forecast quarterly earnings that fell short of expectations and posted a drop in its latest quarter profit.

"We're making progress meeting the changing needs of our customers as we reinvent Staples," Ron Sargent, Staples' chairman and chief executive officer, said in a statement. "Despite a slow start to the first quarter, our results were in line with our expectations and we expect to build momentum throughout 2014."

Shares of retailers Dick's Sporting Goods, TJX Companies and Urban Outfitters also sank, down 17.2 per cent, 6.8 per cent and 7.7 per cent respectively, after reporting earnings that failed to meet the mark.

"What we're seeing is a re-assessment of the growth prospects of earnings," Brad McMillan, the chief investment officer for Commonwealth Financial Network, told Bloomberg News. "It's not a question of 'are we going to grow?' Because we are. It's 'are we going to grow as fast as we thought we would?'"

Indeed, Dudley on Tuesday said that the pace of interest rate rises will be "relatively slow," adding that "this depends, however, in large part, not only on the economy's performance, but also on how financial conditions respond to tightening."

In Europe, the Stoxx 600 Index ended the day edging lower to a close of 338.32. Germany's DAX fell 0.2 per cent, France's CAC 40 slid 0.4 per cent, while the UK's FTSE 100 dropped 0.6 per cent. Shares of Vodafone sank 5.5 per cent after the company predicted a decline in profit this year.