April Retail Sales Rain on Stocks

The Federal Reserve may be worried about inflation, but declining sales last month at some of the nation’s largest retailers suggest that the Fed should add economic growth to its list of concerns.

Falling sales at the likes of Wal-Mart, Federated, J.C. Penny and Target sent stocks tumbling on Thursday, shaving more than 1% off the Dow’s record run and about 1.5% off the S&P and Nasdaq.

The news also hit online retailers like Amazon , which shed 3%.

Investors on Friday will turn their attention to wholesale inflation data, hoping it will remain restrained enough to allow the Fed to cut interest rates.

IBM bucked the downtrend, gaining for a second day on a Goldman Sachs upgrade.

Merge Technologies was a standout, gaining 17% after the medical technology firm beat sales estimates, and Vonage shares jumped 10% after posting better than expected sales. Systemax and Visual Sciences (formerly WebSideStory) also surged on their earnings reports.

Brooks Automation , CryptoLogic , InfoSonics , the Knot and Jupitermedia , publisher of this Web site, fell on their quarterly results.

Apple shares gained in the wake of its shareholder meeting, while Google shares lost ground ahead of its annual stockholder event.

The Nasdaq fell 42 to 2533, the S&P 500 lost 21 to 1491, and the Dow tumbled 148 to 13,215. Volume rose to 2.97 billion shares on the NYSE, and 2.24 billion on the Nasdaq. Declining issues led by a 25-7 margin on the NYSE, and 23-6 on the Nasdaq. Downside volume was 88% on the NYSE, and 86% on the Nasdaq. New highs-new lows were 145-34 on the NYSE, and 118-87 on the Nasdaq.