Wall St Drops On Economic Worries, Retail Sales

U.S. stocks slid on Thursday as disappointing April retail sales and a widening trade deficit raised worries about the economy's health.

U.S. stocks slid on Thursday as disappointing April retail sales and a widening trade deficit raised worries about the economy's health a day after the Federal Reserve reiterated their unease about inflation.

Market participants also noted the temptation for investors to lock in profits given the strong run of recent sessions. The Dow is up nearly 8 percent in the last three months, while the S&P 500 has risen 6.5 percent in the period.

Expectations for April retail sales were set low because Easter came early and the weather was unfavorable, but many companies still fell short of forecasts.

The U.S. trade data showed imports rose to the second highest level on record in March, driven by higher oil prices. The government also reported April import prices -- an inflation gauge used by the Federal Reserve -- rose more than expected, while export prices posted a smaller-than-forecast gain.

"With GDP slowing, the housing market slowing and inflation rising, that's a bad recipe for the stock market. And investors are skeptical that the weakness in retail sales are solely due to the weather," said Steve Neimeth, portfolio manager for AIG SunAmerica Asset Management in Jersey City, New Jersey.

"People are concerned that the Fed is behind the curve. We're seeing rates rise overseas and although the Fed was neutral yesterday, they were concerned about inflation," Neimeth said.

The Dow Jones industrial average was down 140.43 points, or 1.05 percent, at 13,222.44. The Standard & Poor's 500 Index was down 18.02 points, or 1.19 percent, at 1,494.56. The Nasdaq Composite Index was down 37.24 points, or 1.45 percent, at 2,539.10.

Of the 30 Dow stocks, only two were higher in mid-afternoon trading.

Stocks sensitive to economic growth, including energy stocks and manufacturers fell. Oil company Exxon Mobil fell 1.8 percent to $79.61, and was the biggest drag on the Dow and the S&P, while Caterpillar fell 1.5 percent to $73.60.

Shares of Whole Foods Market Inc. fell after the largest natural and organic grocery chain posted lower quarterly profit late on Wednesday.

Whole Foods shares slid 11 percent to $40.79.

Wal-Mart Stores Inc., the world's largest retailer, was among the majority of chain stores that reported April same-store sales that missed expectations.

Several retailers including Children's Place, Pacific Sunwear of California Inc. and New York & Co. Inc. cut their first-quarter earnings forecast after reporting April sales.

Wal-Mart shares were down 0.1 percent at $47.87 on the NYSE. Children's Place shares were down 1.2 percent to $52.8, while Pacific Sun stock shed 1.7 percent to $20.41.

Hershey Co. lowered its 2007 earnings forecast as higher dairy costs hurt the chocolate maker. Shares of Hershey were down 3.8 percent to $52.88 on the NYSE.