May 20 - Summary: Stocks drop on rate warning; Retail earnings disappoint; Home Depot stock jumps on report; GM recalls top 15 million units; Microsoft goes big with Surface Pro 3. Bobbi Rebell reports.
U.S. stocks were already in the red when the Philly Fed's President Charles Plosser gave them an extra kick downward, warning interest rates could be up sooner than some had expected. SOUNDBITE: CHARLES PLOSSER, PHILADELPHIA FEDERAL RESERVE PRESIDENT (ENGLISH) SPEAKING: "As we continue to move closer to our two percent inflation goal and the labor market continues to improve, we must be prepared to adjust policy accordingly. And, indeed, that may well require us to begin raising interest rates sooner than some people seem to think." Plosser also said he was optimistic about the housing market, but he called for more transparency in government help for housing finance. In a separate speech, the New York Fed President William Dudley said the sector's recovery will be slow. Looking at the boards, all the major indices closed to the downside on Tuesday. Disappointing earnings from retailers also behind the broad fall. TJX, the company that runs T.J. Maxx and Marshalls, reported lower-than-expected quarterly revenue on weak sales. The stock slumped more than seven percent. Sales also down at Staples, the fifth straight quarterly fall, with customers shifting to online outlets, mass merchants and drugstores to buy their office supplies. Staples shares plunged almost 13 percent. And weak sales at Caterpillar, dragging down that stock by almost four percent. One bright spot - Home Depot. The company said its sales in May were "robust," taking the sting out of its disappointing first-quarter results due to the severe winter. The stock jumped almost two percent. Microsoft unveiled a larger but lighter version of its Surface Pro tablet, hoping the company's expertise in business software helps take on Apple in mobile devices. It will be priced at $799 and up- a hundred dollars below the MacBook Air- Apple's lightest laptop. General Motors is recalling another 2.42 million vehicles in the United States and doubling the charge it expects to take in the second quarter to about $400 million. GM shares down more than three percent. In Europe, shares inched lower, held back by Vodafone after the world's second-largest mobile network operator reported $11 billion in impairment costs.