Market Tanks on Oil, Inflation Data; Dow Dives 200

Stocks took a 200-point dive on the Dow on Tuesday as the market voiced its displeasure with soaring oil prices and disappointing wholesale inflation data.

Today's Market

The Dow Jones Industrial Average slid 199.48 points, or 1.53% to 12828.68, the Standard & Poor’s 500 index fell 13.21 points, or 0.93%, to 1413.42 and the Nasdaq Composite Index lost 23.83 points, or 0.95%, to 2492.26. The consumer-friendly Fox 50 fell 12.68 points, or 1.26%, to 993.18.

The bulls were unable to shed the negative sentiment that the market ended Monday with as the Dow slid well below the pivotal 13,000 mark. Excluding energy giants ExxonMobil (XOM) and Chevron (CVX), all 30 stocks on the Dow closed firmly in the red. Home Depot (HD) led the way down, tumbling 5.2% on its quarterly results and gloomy outlook. 

Also, General Motors (GM) took a hit, sliding 4.8% after The Wall Street Journal reported gloomy times are ahead for the auto makers. 

Financial stocks fell further than the broader market, losing about 2.5% collectively after influential Oppenheimer analyst Meredith Whitney predicted the credit crisis will reach into at least 2009. 

Forecasting that banks will have to continue protecting against loan-losses, Whitney slashed her 2008 profit outlook for JPMorgan Chase (JPM), Bank of America (BAC) and Wachovia (WB). She also raised her prediction for a 2008 loss for Citigroup (C), which fell 3.8% on the news. 

Traders also received a heavy dose of earnings reports from retailers on Tuesday, including Home Depot, Target (TGT), Saks (SKS) and  Staples (SPLS). While none of the retailers released overwhelmingly positive numbers, they mostly met or beat expectations. 

The market reacted very negatively to the Labor Department's Producer Price Index, which showed inflation at the wholesale level moderated in April. PPI, which gauges the cost of goods for manufacturers, rose 0.2%, in line with estimates. However, "core" PPI, which removes food and energy costs, increased 0.4% in April, compared to expectations of a 0.2% rise.

“I’m a little surprised," said Steve Sachs, director of trading at Rydex Investments, about the market's negative response. “Relatively speaking, it’s not a bad number."

Just a month ago the government revealed a 1.1% surge in wholesale inflation. Over the past year, producer prices have jumped 6.5% on an unadjusted basis. 

Meanwhile, crude prices soared to another record day, nearly touching $130 a barrel. The oil market was bullish on comments made by oil man T. Boone Pickens, who predicted on CNBC that oil would hit $150 a barrel before the end of the year. Also, crude prices were boosted by a decline in the U.S. dollar. Oil closed at a record of $129.07 a barrel, up $2.02 on the day.

"At some point this madness that has hit the oil market will have to reverse itself...Speculators are going to realize that the fundamentals don’t warrant $150 oil," said Peter Cardillo, chief market economist at Avalon Partners. 

Big-name retail companies were in focus on Tuesday. Home Depot (HD) reported adjusted-earnings of $543 million, or 41 cents per share. Analysts were expecting earnings of 37 cents a share. 

However, the results represent a 66% plunge in net income as the retailer was badly hurt by the housing slump. During its conference call, Home Depot said it is more comfortable with the low end of its forecast for a 19% to 24% decline in 2008 earnings, according to Dow Jones.

Another retailer hurting in this economic downturn is Target (TGT). The discount retailer said its profit fell 7.5% in the first quarter, posting a profit of 74 cents a share, three cents higher than the 71-cent estimate expected.

Shares of Saks Corp (SKS) fell 6.6% after the owner of the iconic Saks Fifth Avenue luxury department store said its earnings jumped 66% but failed to reach estimates of 16 cents per share. Office supply chain Staples (SPLS) said it earned 30 cents a share, which was in line with expectations. 

Corporate Movers

AIG (AIG), the struggling insurance giant, fell 2.1% to a near 10 year low on Tuesday. The company said it raised $20 billion in capital in the last month, higher than the $8 billion it originally planned on raising, according to Dow Jones. Also, Merrill Lynch (MER) lowered its AIG earnings forecast, calling the capital raising a "negative surprise," according to Thomson Reuters. 

Hewlett-Packard (HPQ) posted a 16% rise in fiscal second-quarter net income, boosted by strong exports. On an adjusted-basis, HP earned 87 cents per share on an 11% increase in sales, which came in at $28.3 billion. HP's results were in line with preliminary earnings that were released last week, when the company announced its $13.25 billion acquisition of Electronic Data Systems (EDS). Analysts were looking for adjusted-earnings of 85 cents per share on $28.11 billion in sales. 

McGraw-Hill (MHP) fell 2.7% on news it plans to slash 395 jobs and take a $23.7 million hit for the restructuring moves. The owner of ratings agency Standard & Poor's and BusinessWeek also reaffirmed its 2008 earnings guidance of $2.65 to $2.75 per share. 

Netflix (NFLX) rose 1.9% after the online DVD rental service was reportedly upgraded to “overweight” from “equalweight” by Lehman Brothers (LEH). The firm also boosted the stock’s price target to $37, according to Thomson Reuters.

Discover Financial (DFS) tumbled 4.1% after its CFO Roy Guthrie warned the credit card company could be hit with more delinquencies and write-offs.

Capital One Financial (COF) lost 3.8% after influential analyst Meredith Whitney of Oppenheimer cut her 2008 forecast for the credit card company to $5.15 per share from $5.55. On average, analysts expect a profit of $5.23 per share, according to Thomson Reuters.

MF Global (MF) fell 6.2% after it posted a wider-than-expected fiscal fourth-quarter loss on Tuesday. The broker lost $71.1 million, or 59 cents per share, compared to earnings of $76.1 million, or 73 cents, a year ago. Analysts had been looking for a loss of 20 cents per share. MF Global also said it plans to raise at least $300 million, which will be back stopped by an affiliate of J.C. Flowers.

Medtronic (MDT) rose 2.3% after the medical device maker beat the Street. The company's adjusted-earnings of 78 cents per share topped estimates of 72 cents from Thomson Reuters. Medtronic also posted an 18% rise in revenue to $3.86 billion, beating expectations of $3.72 billion. 

Data Dump

The Chicago Fed National Activity index fell to -1.17 in April, another indication that the economy may slip into a recession. The decline brought the index to its ninth straight negative month, the longest such streak since the end of the 2001 recession. 

World Markets

The Dow Jones Euro Stoxx 50 Index, a gauge of the 50 biggest companies in Europe, fell 59.97 points, or 1.54%, to 3822.31. The FTSE 100, London's benchmark index, declined 184.90 points, or 2.90%, to 5191.60. 

On the continent, Paris's CAC 40 Index dropped 87.22 points, or 1.70%, to 5054.88 while Germany's DAX fell 107.44 points, or 1.49%, to 7118.50. 

In Asia, Tokyo's Nikkei 225 Index fell 109.52 points to 14160.09. Hong Kong's Hang Seng Index dropped 572.77 points to 25169.46.