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Stocks Waver on Disappointing Retail Earnings

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11/19/2019 | 03:14pm EST

By Anna Isaac and Paul Vigna

The S&P 500 inched higher Tuesday, though gains were tempered by weakness in shares of Home Depot and other retailers.

The broad stock-market index rose up 0.1%, and the technology-heavy Nasdaq Composite gained 0.4%. The Dow Jones Industrial Average fell 81 points, or 0.3%, to 27954, weighed down by component Home Depot, which slumped 5.3% after trimming its expectations for sales growth. All three indexes closed at records Monday.

A drop here isn't really a surprise, said Nick Reece, senior analyst at Merk Investments. "We've seen sentiment get pretty optimistic," he said. "It's probably a little overstretched."

Shares of retailers were among the biggest decliners in Tuesday's session as the group began reporting third-quarter results. Shares of Kohl's dropped 19%--on track for their worst one-day drop since January 2017 -- after the department-store operator lowered its profit guidance for the year.

The disappointing outlook from both companies weighed on the stocks of other U.S. retailers, as investors grew concerned about the health of a sector that has been strong so far this year. Macy's, which is scheduled to report earnings later in the week, fell 11%, while Nordstrom declined 6.2%. Gap slumped 3.7%.

Meanwhile, discount retailer TJX rose 1.9% after its report showed a strong rise in sales.

Traders also had an eye on Washington, but not necessarily for the main event.

Even though the top focus in the capital was the continuing impeachment hearings, traders said they were also concerned about a bill in the Senate in support of Hong Kong protesters, and how it might affect the continuing negotiations over a U.S.-China trade deal. The bill, if passed, would allow for sanctions against anyone found violating Hong Kong's autonomy.

A vote on the bill, which has been put on an expedited schedule, could happen as soon as Tuesday.

"Some feel traders are concerned that a Senate vote on Hong Kong could blow up chance of trade deal," said Art Cashin, who runs UBS's floor operations at the NYSE.

Globally, stocks edged higher as investors grew less apprehensive about the economic outlook. Hong Kong's Hang Seng Index ended the day up almost 1.6%, while the Shanghai Composite gauge advanced 0.9%.

Meanwhile, the pan-continental Stoxx Europe 600 index fell 0.1%.

"Markets were thinking a recession was imminent at the end of August, now people are discovering that it is less bad than that," said Florian Ielpo, head of macroeconomic research at asset-management firm Unigestion. "Pessimism is starting to fade."

The ICE dollar index, which tracks the greenback against a basket of currencies, dropped sharply immediately after President Trump said he met with Federal Reserve Chairman Jerome Powell at the White House Monday and "protested" about U.S. interest rates being too high. The gauge pared back most of those losses in the hours since.

Mr. Trump, who has been vocal in his criticism of the central bank, tweeted that he discussed the state of the economy, trade issues, and the impact of a "too strong" dollar with the central bank chief. The Fed said Mr. Powell reiterated that he hoped interest-rate cuts earlier this year would bolster the economy.

The yield on the U.S. 10-year Treasurys slipped to 1.785%, from 1.808% on Monday. In commodities, U.S. crude futures fell 3.2% on concerns about excess oil supplies.

Write to Anna Isaac at anna.isaac@wsj.com and Paul Vigna at paul.vigna@wsj.com

Stocks mentioned in the article
ChangeLast1st jan.
CHINA-SHANGHAI COMP 0.43% 2912.01 End-of-day quote.16.58%
DJ INDUSTRIAL 1.22% 28015.06 Delayed Quote.20.09%
HANG SENG 0.08% 26507.33 Real-time Quote.2.48%
NASDAQ 100 1.07% 8397.367217 Delayed Quote.32.66%
NASDAQ COMP. 1.00% 8656.528802 Delayed Quote.30.46%
NORDSTROM, INC 0.40% 37.56 Delayed Quote.-19.42%
S&P 500 0.91% 3145.91 Delayed Quote.25.49%
US DOLLAR INDEX 0.30% 97.7 End-of-day quote.1.05%
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