Wall Street closes lower after Home Depot outlook, US retail sales

May 16 (Reuters) – U.S. stock indexes closed lower on Tuesday after a disappointing forecast from Home Depot and U.S. retail sales data for April pointed to softer spending, while uncertainty over interest rates and debt ceiling negotiations weighed on sentiment.

Home Depot ( HD.N ) fell 2.15% as one of the biggest drags on both the Dow Industrials and the S&P 500 after the home improvement retailer cut its annual sales forecast and projected a steeper-than-expected decline in profit. Shares of other Lowe’s Companies Inc (LOW.N) fell 1.16%.

“You could argue that people are tired of spending on the house, they want experiences, they want to go out, they want to do other things, they don’t want to repair the house according to Home Depot, because they had terrible income,” said Ken Polcari, managing partner at Kace Capital Advisors in Boca Raton, Florida.

The Commerce Department reported that retail sales rose 0.4% in April, less than the estimate for a 0.8% increase. But core sales rebounded, a figure excluding cars, petrol, building materials and food services.

“There is a sense that people are becoming a little more sensitive to the Fed succeeding, and this ongoing drama about the debt ceiling is causing anxiety.”

The Dow Jones Industrial Average (.DJI) fell 336.46 points, or 1.01%, to 33,012.14, the S&P 500 (.SPX) lost 26.38 points, or 0.64%, to 4,109.9 and Nasdaq Composite (.IXIC2 or .IXIC2). 0.18% to 12,343.05.

Recent data has indicated a slowdown in the US economy following a series of interest rate hikes by the Federal Reserve to combat high inflation. This decline, along with recent negotiations over the US debt ceiling, has focused attention on when the central bank will stop hiking or cut interest rates.

While the market is currently pricing in a rate cut by the end of the year, recent comments from Fed officials suggested that they are not ready to cut rates anytime soon.

Richmond Fed President Thomas Barkin said he was “comfortable” with raising rates further if necessary, but liked the “optionality” hinted at in the latest policy statement.

Cleveland Fed President Loretta Mester said she doesn’t think the central bank can keep interest rates steady just yet.

Lawmakers held another round of talks on raising the debt ceiling. The Treasury Department has warned that it could run out of money as soon as June 1 without a deal, triggering a default and likely leading to a sharp economic downturn.

Horizon Therapeutics ( HZNP.O ) fell 14.17% after the Federal Trade Commission said it would file a lawsuit to block Amgen Inc’s ( AMGN.O ) $27.8 billion deal to buy the company. Amgen’s shares fell 2.42 percent.

The decline in both stocks weighed on the Nasdaq Biotech Index ( .NBI ), which closed at a three-week low after falling 2.44%, its biggest one-day percentage decline in three months.

Shares of Capital One Financial Corp ( COF.N ) rose 2.05% a day after Berkshire Hathaway Inc ( BRKa.N ) revealed it had taken a nearly $1 billion stake in the stock.

Declining issues outnumbered advancing on the NYSE by a ratio of 4.05 to 1; on the Nasdaq, a 2.28 to 1 ratio favored decliners.

S&P 500 posted 12 new 52-week highs and 13 new lows; The Nasdaq Composite recorded 47 new highs and 188 new lows.

Volume on US exchanges was 9.36 billion shares, compared to the 10.58 billion average for the full session over the past 20 trading days.

(This story has been corrected to say ‘a rate cut’ instead of ‘a rate rise’ in paragraph 8)

Reporting by Shreyashi Sanyal in Bengaluru; Editing by Maju Samuel

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