Ahmed Elbatrawy

Stocks falter on soft retail sales

u.s. stock market

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NEW YORK (CNNMoney) — U.S. stocks fell early Tuesday as investors weighed a weaker-than-expected report on retail sales and ongoing worries about the debt crisis in Europe.

The Dow Jones industrial average (INDU) was down 40 points, or 0.3%. The SP 500 (SPX) fell 5 points, or 0.4%. The Nasdaq (COMP) shed 10 points, or 0.3%.

U.S. retail retail sales gained only modestly, with a drop in auto sales dragging down the overall result.

“The U.S. economy shows a softer tone today, and growth expectations will be notched down,” said Nick Kalivas, market strategist at Hadrian Partners, in a note to clients.

The retail sales data were also revised lower for the two preceding months and came just a week after disappointing chain store sales reports, Kalivas noted.

Late Monday, Moody’s downgraded six eurozone countries — Italy, Malta, Portugal, Slovakia, Slovenia and Spain — and the credit rating agency also warned that it may also cut the outlooks for Aaa-rated Austria, France and the United Kingdom to “negative.”

But the ratings agency didn’t downgrade the eurozone’s bailout fund, the European Financial Stability Fund, and spared France’s top rating.

On Tuesday, investors showed strong demand for Italian debt in the latest round of auctions. German investor confidence also continued to rebound for a third straight month, rising to a 10-month high in February.

Meanwhile, investors remain on edge ahead of a meeting of eurozone finance ministers, who will consider the latest bailout for Greece when they meet Wednesday. The Greek Parliament voted early Monday to approve a package of austerity measures aimed at securing the bailout, worth €130 billion, from the European Union and the International Monetary Fund.

Shares of U.S. banks were under pressure, with Bank of America (BAC, Fortune 500), Goldman Sachs (GS, Fortune 500) and JPMorgan (JPM, Fortune 500) all down sharply.

Stocks rose on the Greece austerity news Monday, but the gains were modest as worries about the fate of the debt-riddled nation continue to dominate.

Our love-hate relationship with China

World markets: European stocks were lower in afternoon trading. Britain’s FTSE 100 (UKX) eased 0.2% and the DAX (DAX) in Germany lost 0.5%, while France’s CAC 40 (CAC40) was off 0.2%.

Asian markets ended mixed. The Shanghai Composite (SHCOMP) fell 0.3% while the Hang Seng (HSI) in Hong Kong rose 0.2%. An unexpected step by the Bank of Japan to ease its monetary policy sent the Nikkei (N225) higher by 0.6%.

Japan’s central bank said it would expand its asset-purchase program to ¥65 trillion from ¥55 trillion by boosting its purchases of Japanese government bonds. The Bank of Japan also set an inflation target of 1%.

Later Tuesday, President Obama will welcome China’s Vice President Xi Jinping for a two-day visit to Washington.

Economy: Retail sales were up 0.4% in January compared to December, the Commerce Department reported.

Sales were expected to have risen by 0.8%, according to a survey of economists by Briefing.com.

A surprise 1.1% drop in auto sales put a crimp in the overall advance. Excluding auto sales, retail sales rose 0.7% in the latest report.

Later Tuesday, a report on December business inventories is expected to show an increase of 0.5%, following a 0.3% rise in November.

On Capitol Hill, the Senate finance and budget committees will discuss President Obama’s budget proposal

Companies: Shares of Michael Kors (KORS) popped after the fashion label posted better-than-expected fiscal third-quarter earnings and revenue, and also issued upbeat guidance for the fourth quarter.

Zipcar (ZIP), which made its stock market debut last April, posted a profit of $3.9 million, as revenues rose 21% to $62.9 million and total membership jumped 25% during the quarter.

After the closing bell, social gaming company Zynga (ZNGA) will post fourth-quarter results, its first report since its IPO in December.

Currencies and commodities: The dollar rose against the euro and the British pound, but rose versus Japanese yen.

Oil for March delivery rose 72 cents to $101.64 a barrel.

Gold futures for April delivery fell $2.50 to $1,727.4 an ounce.

Bonds: The price on the benchmark 10-year U.S. Treasury was higher, with the yield falling to 1.94% from 1.99% late Monday.  To top of page

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Ahmed Elbatrawy