US stocks fizzle as Wal-Mart falls and China slumps

The drop by shares of Wal-Mart came after the company reported weaker than expected second quarter earnings and lowered its full-year guidance. The Dow Jones Industrial Average fell 43 points, or 0.2%, to 17,503 at the open.

The Standard & Poor’s 500 index slipped 5.52 points, or 0.3 percent, to close at 2,096.92.

“We’re seeing China dominating headlines and concern the consumer is not all in right now”, said Bill Schultz, who oversees $1.2 billion as chief investment officer at McQueen, Ball & Associates in Bethlehem, Pennsylvania. “Most people are staying cool on the lake somewhere”.

“All the news out of China recently has done nothing to restore confidence in its financial markets”, said David Madden, market analyst at IG, “and the ripple effect can be felt in Europe“.

China’s central bank on Tuesday set the yuan’s midpoint near Monday’s closing price at 6.3966 per U.S. dollar. “They’ve digested a lot of the news that’s out there already”.

Wal-Mart shares were down 2.4% at $70.16. But the stability was short-lived as the sell-offs restarted.

Tuesday also saw the release of U.S. housing starts data for July, which came in at 1.206 million, above what economists expected and near an eight-year high. China’s Shanghai Composite Index dropped 0.9 percent to 3,960.71. It was the index’s largest one-day drop since an 8 percent dive on July 27 and happened even though Beijing banned major shareholders from selling stocks. The CAC-40 in France was 0.4 percent lower at 4,963. Britain’s FTSE 100 slipped 0.2 percent.

Worries over China, a key customer for German-made machinery, chemicals and other goods, have helped knock the DAX down three per cent so far in August.

New York markets were negative but also off early lows as traders weighed the Wal-Mart (NYSE:WMT) disappointment against a positive earnings report and outlook from Home Depot and new data that showed U.S. builders started work on single-family houses last month at the fastest pace since the beginning of the Great Recession.

The gains for the S&P 500 pushed the index to roughly where it was a week earlier, before stocks around the world tumbled on the Chinese news.

OIL: The benchmark U.S. crude fell 7 cents at $41.80 per barrel on electronic trading on New York Mercantile Exchange. Brent crude, an worldwide benchmark, dipped 45 cents to $48.74.

Prices of U.S. government bonds rose, tugging down the yield on the 10-year Treasury note to 2.17 percent from 2.20 percent late Friday.

Concerns about slowing demand for commodities from China also hit copper prices, which slid to a six-year low of $4,983 a tonne, breaking the psychological $5,000 level, and were last down 1.8 percent at $5,022 a tonne.