us market

More trouble in store for stocks
Warning from Wal-Mart, caution from Home Depot sends futures lower as investors await wholesale inflation reading.
August 14 2007: 6:55 AM EDT

NEW YORK (CNNMoney.com) -- Warnings from the nation's two largest retailers about earnings diffciulties ahead could hit stocks in the early going, although a look to a key inflation report could again change the direction of futures later Tuesday.

At 6:55 a.m. ET, Nasdaq and S&P futures both turned lower after Wal-Mart Stores (Charts, Fortune 500) lowered its earnings guidance going forward higher, and Home Depot (Charts, Fortune 500) warned it believes the housing and home improvement markets will remain soft into 2008.

Wal-Mart earnings rose and met forecasts for the just completed second quarter, while Home Depot's earnings excluding special items fell less than expectations, but shares of Wal-Mart were off 3 percent in early trading in Frankfurt following the report. The two retailers are both components of the Dow Jones industrial average.

The downturn in futures Tuesday follows another rough day for U.S. stocks Monday as a rally ran out of steam late in the day and ended the session slightly lower.

Futures are also likely to be affected by the Labor Department report on wholesale inflation known as the Producer Price Index, due at 8:30 a.m. ET. Economists surveyed by Briefing.com expect PPI nudged 0.1 percent higher in July.

Core PPI, which excludes volatile food and energy costs, is forecast to have edged higher 0.2 percent, according to consensus forecasts.

Also at 8:30 a.m. ET will come the report on the trade deficit for June. Economists are forecasting that the gap between imports and exports rose to $61 billion from $60 billion on higher oil prices in the period.

The gap with China is likely to get attention, particularly as toymaker Mattel (Charts, Fortune 500) is set to announce a second recall of Chinese-made toys, according to published reports. The toymaker recalled more than a million toys manufactured in China less than two weeks ago.

Stocks in Europe fell after Swiss bank UBS (Charts) warned that if market turbulence persists, its investment banking business would likely be hurt. A report that showed a weaker than expected 2.5 percent year-over-year growth in the economies of the 13-nation eurozone also hit stocks there. Markets in Asia also eased after rebounding the previous session.

In other corporate news, Dutch life insurer Aegon (Charts) said late Monday it will buy two life insurance units of Wall Street firm Merrill Lynch (Charts, Fortune 500) for $1.3 billion in cash.

Treasury prices were lower in early trading ahead of the PPI report, taking the yield on the 10-year note to 4.78 percent from the 4.76 percent level reached late Monday. The dollar was solidly higher against the euro on the eurozone GDP report and slightly higher against the yen in early trading.

Oil prices rose in early trading, as the price of U.S. light crude gained 31 cents to $71.93 a barrel in electronic trading.