NEW YORK - Wal-Mart Stores Inc.'s warnings of lagging second-quarter profits reverberated across Wall Street Thursday, sending stocks lower despite a sharp drop in oil prices and otherwise strong retail sales.
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 could hurt 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 0.8 percent rise.
In midmorning trading, the Dow Jones industrial average fell 18.40, or 0.2 percent, to 10,281.85.
Broader stock indicators also gained ground. The Standard & Poor's 500 index was down 1.86, or 0.2 percent, at 1,169.25, and the Nasdaq composite index lost 0.25, or 0.01 percent, to 1,971.30.
Oil prices fell in early trading, but their still high levels going into the summer driving season exacerbated worries of an economic slowdown as consumers spend more on gasoline and less on everything else. A barrel of light crude was quoted at $49.55, down 90 cents, on the New York Mercantile Exchange.
The bond market edged lower along with stocks, with the yield on the 10-year Treasury note rising to 4.23 percent from 4.20 percent late Wednesday. The dollar rose against most major currencies, while gold prices fell.
While profits at Wal-Mart rose 14 percent from the first quarter last year, the company's warning on its second-quarter earnings unnerved investors who have grown accustomed to strong gains at the nation's largest retailer. Wal-Mart tumbled $1.10 to $47.50 after missing analysts' expectations by a penny per share.
Embattled Wall Street firm Morgan Stanley fell 4 cents to $49.81 after a group of dissident shareholders publicized their plan to spin off the company's investment banking business from the rest of the firm, essentially reversing its 1997 merger with Dean Witter & Co. The dissidents claim their plan was developed with the help of institutional shareholders.
3M Co. has agreed to purchase filtration products maker Cuno Inc. for $1.35 billion in cash and assumed debt, a deal that would expand 3M's reach in the liquid- and gas-filtration market. 3M lost 68 cents to $76.31, while Cuno surged 29.5 percent, or $16.16, to $70.98.
Ameritrade Holding Corp. dropped 54 cents to $13.22 after the company said it is not for sale, essentially rebuffing a takeover offer from E-Trade Financial Corp. E-Trade slipped 24 cents to $12.14 on the news.
The Russell 2000 index of smaller companies was down 1.05, or 0.2 percent, at 594.52.
Advancing issues barely outnumbered decliners on the New York Stock Exchange, where volume came to 140.38 million shares, compared with 130.44 million at the same point on Wednesday.
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