Volatile Dow keeps on retreat

<p>NEW YORK -- Wall Street pulled back sharply Tuesday as investors worried about fundamental economic problems as well as the ongoing fallout from credit market problems and stocks' own volatility. The Dow Jones industrials skidded more than 200 points.</p><p>The downturn in stocks was first triggered by a report from Wal-Mart Stores Inc. that profits will fall below expectations this year as consumers rein in spending. Home Depot Inc., the world's biggest home improvement chain, added to the slide when it said weakness in the housing market caused quarterly profits to slide.</p><p>Confirmation that Sentinel Management Group Inc., which oversees $1.6 billion in assets, is seeking to halt investor redemptions exacerbated the selling. Other funds are said to have similar problems as they face withdrawal demands at a time it has become difficult to value low-quality debt.</p><p>Hedge funds and other big institutional investors have taken a beating in recent weeks. On Monday, Goldman Sachs Group Inc. said three funds it manages have had significant losses -- and infused $3 billion in capital into one of them.</p><p>Wall Street has been pummeled as a deepening credit crunch spooked the market, and led to unease about potential losses at financial firms and funds. The Federal Reserve, which has injected $64 billion of liquidity into the banking system since Thursday, said it stood ready to act again should market conditions warrant.</p><p>While the market seemed to be looking past most economic news in recent weeks, on Tuesday the earnings reports and their implications for consumer spending compounded an already high state of anxiety.</p><p>"The market is very, very sensitive at this point, and any news about a potential financial problem is going to affect the way that the market trades," said Scott Fullman, director of investment strategy for I.A. Englander &amp; Co. "We've been seeing extreme sensitivity in the financials, but also in the consumer stocks and industrials during the session."</p><p>The Dow fell 207.61 points, or 1.57 percent, to 13,028.92. The benchmark index is now on the verge of falling back below the psychologically important 13,000 mark, which it first crossed in late April.</p><p>Broader stock indicators were lower. The Standard &amp; Poor's 500 index shed 26.38 points, or 1.82 percent, to 1,426.54, and the Nasdaq composite index fell 43.12 points, or 1.70 percent, to 2,499.12.</p><p>The retreat ended a one-day reprieve from triple-digit moves in the Dow, but no one really had expected that the market had moved past its protracted period of volatility. The Dow, which went from 13,000 to 14,000 in just 57 trading days ended in mid-July, is now up only 4.54 percent for the year.</p><p>Meanwhile, the S&amp;P 500 is close to wiping out all its gains and is ahead just 0.58 percent. The Nasdaq is up 3.47 percent.</p><p>Bonds rose, with the yield on the benchmark 10-year Treasury note falling to 4.73 percent from 4.78 percent late Monday. The fixed-income market has rallied as stock investors move into securities deemed less volatile.</p><p>Stocks originally were lifted in early trading on government data that indicated inflation remains in check, but that gave way to further concerns about consumer spending and widening credit worries.</p><p>Mike Malone, a trading analyst at Cowen &amp; Co., said efforts by central banks to stabilize the markets had been somewhat successful. On Tuesday, the European Central Bank injected an additional $10.5 billion into money markets and said conditions were normalizing after several days of volatility. There was no action Tuesday by the Fed.</p><p>Malone said "there is still a tremendous amount of risk out there."</p><p>Among the hardest hit sectors on Tuesday were financial services stocks, which have been sliding as worries mounted that subprime loan trouble could spread to other parts of the economy. Major investment banks have reported losses linked to mortgage-backed securities.</p><p>Goldman Sachs fell $7.75, or 4.4 percent, to $169.75, extending losses from Monday. Bear Stearns Cos., which earlier this summer disclosed that two of its funds were all but wiped out, fell $3.60, or 3.3 percent, to $106.</p><p>Toymaker Mattel Inc. shares fell 57 cents, or 2.4 percent, to $23 after it announced the recall of 8.8 million toys. It was Mattel's second big recall of Chinese-made toys in two weeks.</p><p>Declining issues outpaced advancers by a ratio of 3-to-1 on the New York Stock Exchange, where consolidated volume came to 3.72 billion shares, up from 3.54 billion on Monday.</p><p>Light, sweet crude rose 76 cents to $72.38 on the New York Mercantile Exchange. The dollar was lower against other major currencies, while gold prices fell.</p><p>The Russell 2000 index of smaller companies fell 16.94, or 2.17 percent, to 762.87.</p><p>Japan's Nikkei stock average rose 0.27 percent. Britain's FTSE 100 fell 0.10 percent, Germany's DAX index slipped 0.52 percent, and France's CAC-40 fell 0.82 percent.</p>