Consumer Woes Weigh On Wall Street

US stock indexes closed lower on Tuesday after a disappointing forecast from Home Depot and US retail sales data for April pointed to softer consumer spending, while uncertainty about interest rates and debt limit negotiations weighed on sentiment.

Home Depot declined 2.15 percent as one of the biggest drag on both the Dow Industrials and 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 fell 1.16 percent.

"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 percent in April, short of the estimate for an increase of 0.8 percent. 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 Dow Jones Industrial Average fell 1.01 percent, to 33,012, the S&P 500 lost 0.64 percent, to 4,110 and the Nasdaq Composite dipped 0.18 percent, to 12,343.

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

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 held a new round of talks about raising the debt ceiling. The Treasury Department has warned it could run out of money as soon as June 1 without a deal, which would trigger a default and likely cause a sharp economic slump.

Horizon Therapeutics tumbled 14.17 percent as the Federal Trade Commission said it would file a lawsuit to block Amgen's US$27.8 billion deal to buy the company. Shares of Amgen fell 2.42 percent.

Shares of Capital One Financial Corp climbed 2.05 percent the day after Berkshire Hathaway disclosed it had taken a stake of nearly US$1 billion in the stock. (Reuters)