Credit worries and Wal-Mart slam Wall St

By Kristina Cooke

NEW YORK (Reuters) - U.S. stocks skidded on Tuesday on fresh signs that global credit markets were seizing up, while a lower profit forecast from Wal-Mart Stores Inc. (WMT.N) renewed worries about consumer spending.

Wal-Mart's pessimistic outlook and subsequent news that a U.S. investment firm wants to halt redemptions delivered a one-two punch to already shaky confidence.

In the latest sign of a deteriorating credit environment, Sentinel Management Group Inc., which oversees about $1.6 billion in assets, told clients it wants to stop investors from withdrawing their cash to avoid forced liquidation.

"Sentinel caught the biggest headlines today, and there were rumors about more liquidity issues and more distress concerning the investment banks," said David Katz, chief investment officer at Matrix Asset Advisors in New York.

"The market is shooting first and asking questions later, and as in the past weeks, weakness has begotten more weakness."

The Dow Jones industrial average .DJI tumbled 207.61 points, or 1.57 percent, to 13,028.92 -- its lowest close since April 24.

The Standard & Poor's 500 Index .SPX slid 26.38 points, or 1.82 percent, to 1,426.54, leaving it up just 0.6 percent for the year. The S&P 500 hit a lifetime high on July 16, and on that date, it was up 9.7 percent for the year.

The Nasdaq Composite Index .IXIC slumped 43.12 points, or 1.70 percent, to 2,499.12, closing below the 2,500 mark for the first time since April 13.

U.S. Treasury bond prices rose as investors dumped equities for the safe haven of government bonds. The yield on the benchmark 10-year note US10YT=RR slipped 3 basis points to 4.73 percent -- a full 60 basis points below a June high -- the biggest two-month drop in yields for nearly a year.

Reflecting the punishing day in the stock market, losers beat winners by a ratio of about 8 to 1 on the New York Stock Exchange and by 3 to 1 on the Nasdaq. Trading was moderate on the NYSE, with about 1.8 billion shares changing hands, below last year's estimated daily average of 1.84 billion, while on Nasdaq, about 1.98 billion shares traded, below last year's daily average of 2.02 billion.

WAL-MART WOES

Wal-Mart blamed pressure from the housing market for its disappointing earnings report and the reduction in its full-year earnings forecast, sending its shares down 5.1 percent to $43.82, leading decliners in the S&P.

Home Depot Inc (HD.N) shares dropped 4.9 percent to $33.52 after the home improvement store reported its first quarterly sales decline in more than four years as the housing market softened. The S&P retail index .RLX slid 3.6 percent to 454.93, an 11-month low.

Boeing Co. (BA.N) was the top drag on the Dow, partly on concern that some orders for its planes hinge on financing that could be threatened by the credit market turmoil. Its shares fell 2.4 percent to $97.63 on the NYSE.

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