[R]11:30AM Market averages traded lower, led by retailers and financials.[/R]

U.S. market averages traded steeply lower, pressured by concerns about consumer spending amid weak results from Wal-Mart Stores and pessimistic forecast about slowing housing market from home-improvement retailer Home Depot. The retail sector was led down by Wal-Mart (WMT: chart) which dropped 5% and Home Depot (HD: chart) falling 3%. Mattel (MAT: chart) was another decliner in the sector, falling 2%.

Financial stocks continued to post heavy losses, with Goldman Sachs (GS: chart) falling 4.5, Morgan Stanley (MS: chart) losing 3% and Lehman Bros (LEH: chart) moving down 4%. UBS (UBS: chart) also added to concerns about financial markets. Europe's largest bank fell 3% after it reported a 79% rise in Q2 profit, but warned earnings in the second-half would be lower than last year.

Biotechnology sector was among the very few posting gains. The strength was largely due to OSI Pharmaceuticals (OSIP: chart) which rose 5.4% following an upgrade by J.P. Morgan.

Technology shares were earlier supported by the public offering of EMC Corp. (EMC: chart). VMware (VMW: chart) beat out Fortress to rank as the biggest first-day gainer in the IPO market. It opened at $52, 76% over its $29 offering price in recent trads.

In midday trading, the Dow Jones industrial average fell 128.35, or 0.97%, to 13,108.18. The Standard & Poor's 500 index shed 15.07, or 1.04%, at 1,437.85, and the Nasdaq composite index fell 18.30, or 0.72%, at 2,523.94.


[R]Producer price index rose 0.6% in July.[/R]

Tuesday morning, the Department of Labor released its report on producer prices in the month of July, showing that prices rose much more than economists had been expecting due to a rebound in energy prices. The Labor Department said its producer price index rose 0.6 percent in July following a 0.2 percent decrease in June. Economists had been expecting a much more modest increase in prices of about 0.1 percent. With the increase, the annual rate of producer price growth accelerated to 4.0 percent from 3.3 percent in the previous month.

The bigger than expected increase in producer prices was largely due to a rebound in energy prices, which jumped 2.5 percent in July after falling 1.1 percent in the previous month. Prices for gasoline surged up 3.2 percent following a 3.9 percent decline in June. At the same time, food prices moved lower for the third consecutive month, slipping 0.1 percent in July after falling 0.8 percent and 0.2 percent in June and May, respectively. The decrease was partly due to a continued drop in prices for fresh fruits and melons.

However, the report also showed that the core producer price index, which excludes food and energy prices, edged up 0.1 percent in July after rising 0.3 percent in the previous month. The increase came in slightly below economist estimates of a 0.2 percent increase. The bigger than expected rise in producer prices may raise some concerns about the outlook for inflation, although the Federal Reserve has indicated that it is focused on core inflation.


[R]U.S. trade deficit unexpectedly narrowed in June.[/R]

The Department of Commerce released its report on U.S. international trade in goods and services in the month of June on Tuesday, showing that the trade deficit unexpectedly narrowed compared to the previous month. The report showed that the trade deficit narrowed to $58.1 billion in June from a revised $59.2 billion in May. Economists had expected the deficit to widen to $61.0 billion from the $60.0 billion originally reported for the previous month.

The narrower deficit came as an increase in the value of exports outpaced an increase in the value of imports. The value of exports rose 1.4 percent to $134.5 billion, while the value of imports edged up 0.5 percent to $192.7 billion. The Commerce Department also that the goods deficit narrowed to $67.5 billion in June, while the services surplus was virtually unchanged at $9.4 billion. The report also showed that the politically sensitive trade deficit with China widened to $21.2 billion in June from $20.0 billion in May.


[R]09:45AM Wall Street opened slightly higher. Wal-Mart and Home Depot weighed.[/R]

Wall Street opened slightly higher Tuesday. Shortly afterwards, the market averages turned mixed, reflecting a drop in the trade deficit and benign wholesale inflation along with weak results from two leading retail companies. The Labor Department said wholesale prices rose for the fifth time in six months. In another report, the Commerce Department said the U.S. trade deficit hit a 4-month low in June.

Blue-chip stocks posted losses as Dow component Wal-Mart (WMT: chart) fell 4.7% after it cut its full-year earnings outlook, saying underlying performance in Q2 was disappointing. The retailer said its Q2 profit rose 49% but results excluding one-time items missed expectations.

Home Depot (HD: chart) dropped 1.5% after it posted a 15% profit decline and forecast housing market would continue to slow down. The world''s largest home improvement store chain said sales dropped, particularly same-store sales. Quarterly results beat expectations and the company confirmed that it expects its earnings per share from continuing operations will continue to decline in 2007.