Gas prices hurt Wal-Mart,
dragging down stocks

NEW YORK » Stocks tumbled sharply yesterday as a second-quarter profit warning from Wal-Mart Stores Inc. overshadowed strong economic news and a sharp drop in oil prices. The Dow Jones industrial average suffered a triple-digit loss for the second time this week.

Investors' fears of an economic slowdown were heightened after Wal-Mart missed Wall Street's profit expectations for the quarter and, more importantly, said high gasoline prices have hurt customer spending and will affect the company's second-quarter results.

That put a damper on a very positive Commerce Department report, which showed a 1.4 percent increase in retail sales, the best gain in six months. Analysts had been expecting a rise of 0.8 percent.

Combined with oil falling below $49 per barrel, the balance of news could be swinging in the market's favor, but investors' pessimism instead sent stocks falling.

"Wal-Mart is overshadowing it, but the fact remains the economic news is good. It indicates that the mild slowdown in economic activity we've seen is probably going to be short lived," said Peter Cardillo, chief strategist and senior vice president at S.W. Bach & Co.

The Dow fell 110.77, or 1.08 percent, to 10,189.48. The index lost 103.23 points on Tuesday and is down 1.51 percent for the week so far.

Broader stock indicators also lost considerable ground. The Standard & Poor's 500 index was down 11.75, or 1 percent, at 1,159.36, and the Nasdaq composite index fell 7.67, or 0.39 percent, to 1,963.88.

The price of oil price dropped sharply for a second straight session. But it remains high enough going into the summer driving season to exacerbate worries of an economic slowdown as consumers spend more on gasoline and less on everything else. A barrel of light crude settled at $48.54, down $1.91, on the New York Mercantile Exchange -- near an 11-week low.

Falling crude futures took shares of oil companies lower as well. Exxon Mobil Corp. lost $2.47 to $54.82, while Chevron Corp. fell $1.35 to $52.05.

Investors continued to focus on the Federal Reserve and interest rates, despite the good economic news. Many on Wall Street are concerned that higher rates could choke off economic growth, but also that inflation may take hold if rates are too low.

"It's clear that the economy is growing, and it's growing in a way you'd hope it would be in this point in the cycle," said Hans Olsen, managing director and chief investment officer at Bingham Legg Advisers in Boston. "The economy is throwing a party and the stock market's not attending."