Stocks fall on disappointing retail sales data

NEW YORK -- Stocks slid Tuesday after a suprisingly weak retail sales report punctured the market's optimism about the economy.

The poor sales data, combined with a sharp drop in wholesale prices, came just as the corporate earnings season, usually a volatile time in the market, got underway. The Dow Jones industrials lost nearly 140 points.

Underscoring the market's sensitivity, shares in Intel fell sharply in after-hours trading after the chipmaker reported weaker results after the bell and didn't offer a forecast for revenue.

Investors are already braced for bad earnings but are highly anxious about forecasts from companies that could indicate a weaker economy. Poor outlooks in the last earnings season in January derailed a 20% rally, and some fear the market's current five-week rally could be vulnerable as well.

Financial stocks tumbled after Goldman Sachs Group announced strong profits but said it would raise $5 billion to repay government bailout money. Investors speculated that other major banks might follow suit, which would put pressure on their stocks. Citigroup and JPMorgan Chase are also due to report results this week.

The Dow closed down 137.63, or 1.7%, at 7,920.18.

Broader measures also lost ground after three days of gains. The Standard & Poor's 500 index fell 17.23, or 2%, to 841.50, and the Nasdaq composite index fell 27.59, or 1.7%, to 1,625.72.

Tuesday's selling was orderly and extended a give-and-take pattern the market has followed since halting a steep slide over the first two months of the year. Stocks have risen from 12-year lows since then on hopes that banks are getting through the worst of their problems and the economy might be bottoming out, though both the Dow and S&P 500 are still below where they started the year.

The unexpected 1.1% slump in retail sales in March undermined the market's brightening outlook for the economy. The drop was far worse than the increase of 0.3% that analysts polled by Thomson Reuters expected and marked the biggest fall in three months. Investors watch retail sales trends closely as a barometer of consumer spending, which makes up two-thirds of U.S. economic activity.