MarketView for May 20

Summary

It was not a good day for retailers on Wall Street on Tuesday as the Street unloaded shares in several big retail chains, dragging down share prices in general and wiping out small gains from a day earlier. Disappointing earnings from Staples, Dick's Sporting Goods, Urban Outfitters and others triggered the selling spree.

The S&P 500's top five decliners were all retail stocks, including TJX Cos Inc (TJX.N), down 7.6 percent at $53.95, after the owner of off-price chain stores TJ Maxx and Marshalls reported lower-than-expected quarterly revenue.

The downturn in retail stocks came in a slow week for economic news and ahead of the Memorial Day weekend, which contributed to lighter-than-usual trading volumes. The weakness stirred fresh concerns about the retail sector and the outlook for consumer spending.

Staples fell 12.6 percent to $11.71 after the office supply retailer posted first-quarter earnings and forecast a decline in sales in the current quarter.

Other decliners were Urban Outfitters, down 8.8 percent at $32.98; Best Buy, off 5.6 percent at $24.66, and PetSmart, down 4.7 percent at $62.19.

However, Home Depot rose 1.9 percent to close at $77.96, after the company's chief financial officer said sales in May were "robust," taking the sting out of its disappointing first-quarter results due to the severe winter.

Dick's Sporting Goods estimated current-quarter earnings way below analysts' average estimate and cut its full-year 2014 adjusted earnings and same-store sales growth forecasts due to weak demand for its golf and hunting products. Its stock plunged 18 percent to close at $43.60.

Equities have pulled back more than 1 percent since the Dow and the S&P 500 hit record closing highs on May 13 as investors look for signs confirming acceleration in the economy that many had hoped to see at this point in the year.

For the fourth straight session, the number of Nasdaq-listed companies hitting 52-week lows - 55 - exceeded the number hitting 52-week highs - 38. More than two-thirds of stocks traded on the New York Stock Exchange declined.

Nine of the 10 sectors in the S&P 500 index fell, led by telecommunications stocks. The only one that rose was utilities. Investors tend to favor that sector when they want to play it safe with low-risk stocks that pay steady dividends.

Among other the stocks making news Tuesday, Medtronic agreed to pay more than $1 billion to settle long-standing patent litigation with fellow medical device maker Edwards Lifesciences over replacement heart valves. Medtronic's stock ended the day down 93 cents to close at $59.41. Target closed down $1.68 to $56.61 after the company fired the president of its troubled Canadian operations, replacing him with a company insider.

Small-cap stocks fell after gaining for the past two sessions, with the Russell 2000 off 1.5 percent, far outpacing the S&P 500's 0.7 percent decline.

Investors are concerned about the divergence between small- and large-cap performances, worrying that the weakness in small names could spread throughout the market.

The Russell has neared correction territory several times recently, defined as a drop of 10 percent from a recent closing high. The index is 9.3 percent below that high, which was reached on March 4.

Caterpillar fell 3.6 percent to $101.56, ranking as the heaviest weight on the Dow Jones Industrial Average after the heavy machinery company said retail statistics for the three-month rolling period ending in April were down 13 percent.

General Motors (lost 3.4 percent to end the day at $33.07 after the company said it is recalling another 2.42 million vehicles in the United States and doubling the charge it expects to take in the second quarter to about $400 million.

In contrast, Aeroflex Holding rose 25.4 percent to $10.42. British aerospace and defense supplier Cobham  is buying the company for $1.46 billion, including the assumption of Aeroflex's debt.

Approximately 5.7 billion shares changed hands on the major equity exchanges, a number that was below the month-to-date average of 5.97 billion shares according to BATS exchange data.