Wall Street Slides Despite Positive Earnings News

US stocks ended down on Tuesday, slumping on a sharp decline in telecom stocks and weak housing starts data that overshadowed better-than-expected earnings from Walmart and Home Depot.

AT&T shed 5.8 percent, among the biggest percentage decliners in the benchmark S&P 500. It extended declines from Monday, when the telecoms firm said it would cut its dividend payout ratio as a result of its US$43 billion media asset deal with Discovery.

T-Mobile and Verizon Communications also dropped 3.71 percent and 1.31 percent.

The three main indexes opened higher after Walmart, the world's biggest retailer, raised its full-year earnings forecast and Home Depot reported quarterly same-store sales above estimates.

"Those are both emblematic of strength in the corporate sector and also of the consumer. I mean, you can't have Walmart and Home Depot have blowout earnings without the consumer really stepping up spending stimulus checks, adopting ecommerce, as well as getting back into stores", said Ross Mayfield, investment strategist at Baird in Louisville, Kentucky. "And a lot of the bull thesis for the market right now is still built on a really strong reopening of the economy."

Despite its strong results, Home Depot's shares went down 1.02 percent, under pressure due to the lack of a solid outlook and the housing data.

Latest data showed US homebuilding fell more than expected in April, likely pulled down by soaring prices for lumber and other materials.

Minutes from the Fed's April policy meeting will be parsed on Wednesday for the central bank's view of the economy.

"The market is bracing for a transition," said Quincy Krosby, chief market strategist at Prudential Financial in Newark, New Jersey. "So there's a little bit of de-risking going on."

Wall Street has been volatile in recent days, with investors worried that an overheating economy could prompt the Federal Reserve to rein in its monetary support following a spike in volatility last week after strong inflation readings.

The Dow Jones Industrial Average fell 0.78 percent, to 34,061, the S&P 500 lost 0.85 percent, to 4,128 and the Nasdaq Composite dropped 0.56 percent, to 13,304. (Reuters)