Why Wal-Mart Can't Save the Dow Today

For the second day in a row, blue-chip stocks are down considerably. On the heels of yesterday's triple-digit loss, the Dow Jones Industrial Average (DJINDICES: ^DJI  ) is down 76 points, or 0.55%, with roughly an hour left in trading.

All eyes have been on the housing market over the last few days as a handful of reports have led some analysts to conclude that the still-nascent recovery may be floundering. On Tuesday, the National Association of Home Builders reported that confidence among homebuilders declined in its most recent Housing Market Index. And yesterday, the Department of commerce released data (link opens PDF) showing that housing starts fell by 8.5% in January compared to December.

The one reprieve was news that existing-home sales edged up last month. The National Association of Realtors said today that sales of previously owned homes increased 0.4% to a seasonally adjusted annual rate of 4.92 million in January. This was 9.1% higher than in January of 2011. In addition, total housing inventory continued its descent, falling 4.9% last month to 1.74 million existing homes. This is the lowest level since April 2005. According to NAR's chief economist, Lawrence Yun: "Buyer traffic is 40% above a year ago, so there is plenty of demand but insufficient inventory to improve sales more strongly. We've transitioned into a seller's market in much of the country."

Adding to the angst over housing, the Federal Reserve released the minutes to its most recent monetary-policy committee meeting yesterday. While the central bank continues to buy upwards of $85 billion in long-term securities every month, bolstering both housing and bond prices, there's a growing consensus on the board that it may be time to ease off the support sooner rather than later. Several participants at the January meeting "emphasized that the committee should be prepared to vary the pace of asset purchases, either in response to changes in the economic outlook or as its evaluation of the efficacy and costs of such purchases evolved."

In terms of individual stocks, Bank of America (NYSE: BAC  ) and Home Depot (NYSE: HD  ) are currently leading the Dow lower, down by 3.5% and 3%, respectively. Suffice it to say that it's no coincidence that the housing market is intimately interwoven into the fabric of both of these companies -- B of A through its provision of mortgages and Home Depot via its sale of appliances and other house-related wares.

Alternatively, the best-performing stock on the blue-chip index is Wal-Mart (NYSE: WMT  ) , which is up 2.2% near the end of today's trading session. Internal emails leaked last week show concern, if not panic, among executives at the company over recent sales trends. Here's how one reads: "In case you haven't seen a sales report these days, February [month-to-date] sales are a total disaster. The worst start to a month I have seen in my [approximately] 7 years with the company."

Fortunately, the retailer's results from last quarter weren't quite so dire. This morning the company reported better-than-expected fourth-quarter earnings per share of $1.67, up from $1.50 per share last year and better than the $1.57 expected by analysts. It nevertheless confirmed that February has been "slower than planned" due in part to the IRS's decision to delay processing tax returns by eight days.

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