Stocks Struggle to Rally Around Data as Euro Crisis Looms

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Continued concerns about the European sovereign debt mess kept a lid on stocks Tuesday, preventing the bulls from rallying around a series of positive reports on the state of the U.S. economic recovery.

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Today's Markets

As of 12:12 p.m. ET, the Dow Jones Industrial Average lost 30.35 points, or 0.25%, to 12048.71, the Standard & Poor's 500 sank 1.84 points, or 0.15%, to 1249.94 and the Nasdaq Composite added 2.43 points, or 0.09%, to 2659.72.

Traders were digesting an onslaught of conflicting headlines, including the strongest jump in core retail sales since March, an earnings miss from Wal-Mart (NYSE:WMT) and new signs that European policymakers are struggling to cement deals on a pair of bailout funds.

The back-and-forth action puts Wall Street in jeopardy to suffer a second-straight day of losses. Hurt by concerns about the crisis in Europe, the blue chips slumped 75 points on Monday, leaving them up just over 4% on the year.

“It’s clear that European debt issues are paralyzing investing decisions, a rational response it seems as the unprecedented nature of what is ailing us can't be modeled,” Peter Boockvar, managing director at Miller Tabak, wrote in a note.

For signs of the crisis of confidence in Europe, look no further than the rising yield needed to draw investors to Italy, the euro-zone’s third-largest economy. The yield on the Italian 10-year bond once again crept above the 7% mark, a psychologically-important level that previously shut Greece and Ireland out of the bond market. Traders have feared that Italy, which is too big to bail out, will ultimately be unable to tap the capital markets and be forced to default, triggering a significantly deeper crisis.

European policymakers have been scrambling to build a pair of rescue funds aimed at shoring up investor confidence and preventing troubled euro-zone nations from defaulting (bringing European banks with them).

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However, talks to increase the lending capacity of the European Financial Stability Facility, a $600 billion rescue fund, have yielded no real progress due to major disagreements, The Wall Street Journal reported. Likewise, efforts to speed up the adoption of the European Stability Mechanism, a permanent bailout fund, to mid-2012 is also unlikely to happen, the paper reported.

While European policymakers race to create credible solutions, the euro-zone is brushing up against a double-dip recession. New data released on Tuesday show euro-zone gross domestic product inched up just 0.2%, down from 1.4% the year before. That growth matched expectations, but also underscores fears the euro-zone may already be in the midst of a double-dip recession.

With that backdrop in mind, the closely-watched euro dropped 0.55% to $1.3550. The yield on the 10-year bond of France also crept closer to 4%, hitting its highest level since May.

In further a sign of the euro-zone jitters, the cost to insure European sovereign debt hit fresh record highs on Tuesday, highlighted by big increases for the bonds of Italy, Spain and France.

Domestic Earnings, Data Offset Euro Woes

Back on the other side of the Atlantic, U.S. traders received a flurry of mostly positive economic reports indicating the American economy is doing much better than Europe's.

With the holiday shopping season looming, the Commerce Department said retail sales climbed 0.5% in October, beating forecasts for a rise of 0.3%. Excluding autos, retail sales jumped 0.6% -- the strongest performance in seven months. Electronics/appliance store sales registered their biggest rise in almost two years, soaring 3.7%. In a separate report, the government said business inventories were unchanged in September at $1.532 trillion.

Economic sentiment was also boosted by the New York Fed's Empire State manufacturing index, which rose to 0.61 in November, up from -8.48 in October. That marked the first positive print on this regional indicator since May.

The Commerce Department also said U.S. producer prices shrank by 0.3% last month, cooler than the 0.1% estimate from economists and well off September's 0.8% rise. Excluding food and energy, PPI was unchanged, compared with estimates for a rise of 0.1%.

On the earnings front, shares of Wal-Mart (NYSE:WMT) slumped more than 2% as the world’s largest retailer reported slightly weaker-than-expected third-quarter earnings of 97 cents a share. For the all-important holiday shopping season, Wal-Mart projected EPS of $1.42 to $1.48, compared with estimates for $1.45.

Home Depot's (NYSE:HD) stock also slipped a bit after it beat the Street with third-quarter earnings of 60 cents a share on revenue of $17.33 billion. The results led the home improvement retailer to boost its dividend by 16%.

After sinking earlier in the day, the commodities complex was mixed. Crude oil rose 66 cents a barrel, or 0.67%, to $98.88. Gold declined $2.00 a troy ounce, or 0.11%, to $1,776.40.

Corporate Movers

Dick’s Sporting Goods (NYSE:DKS) beat the Street by posting a non-GAAP profit of 32 cents a share, compared with estimates for just 26 cents. Total sales jumped 9.3% to $1.18 billion, narrowly surpassing forecasts from analysts. The sporting goods retailer also raised its full-year EPS view and revealed plans to pay a dividend for the first time.

TJX (NYSE:TJX) posted a 9.2% rise in third-quarter profits to $1.06 a share, topping estimates by a penny. The parent of T.J. Maxx and Marshalls also upped its holiday-sales outlook slightly.

Global Markets

The U.K.’s FTSE 100 dropped 1.02% to 5462.65, Germany’s DAX slumped 1.96% to 5867.78 and France’s CAC 40 tumbled 2.08% to 3044.18.

In Asia, Japan’s Nikkei 225 lost 0.72% to 8541.93 and Hong Kong’s Hang Seng slid 0.82% to 19348.40.

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