Tuesday's trade was somewhat of a reversal of what we saw yesterday. On Monday, the major U.S. indexes started the day off in negative territory and languished there until an afternoon rally saved the day. On Tuesday, it looked like stocks were poised to book some decent gains, but a late-day meltdown scuttled any plans the bulls had for a positive close. The Dow Jones Industrial Average shed almost 115 points to close at 10,510.95 while the S&P 500 lost 16 points to finish the day at 1120.80. Tech continues the weak as the Nasdaq slid 37 points to 2317.26 and small-caps may be getting to rollover after an almost 2% decline for the Russell 2000. All four indexes were down by at least 1%.

Stats Table

Two of biggest U.S. retailers and Dow components at that reported first-quarter results before the bell. Decent news from Home Depot (HD) and Wal-Mart (WMT) should have been enough to encourage some positive trade. Then again, this earnings season has shown investors that the positive expectations were already baked into the share prices of many stocks and the ensuing reaction to even the best reports has been nothing if not disappointing. Expecting Home Depot and Wal-Mart to set the world on fire today was probably asking for too much given the current environment.

Atlanta-based Home Depot's profit update, and more importantly, its guidance, were superior to what rival Lowe's (LOW) offered up yesterday. Home Depot said it earned $725 million, or 43 cents a share, compared to $514 million, or 30 cents a share, a year earlier. Excluding one-time items, the largest U.S. home improvement retailer earned 45 cents a share on sales of $16.86 billion. Analysts were expecting a profit of 40 cents a share on sales of $16.37 billion.

While the guidance offered by Lowe's yesterday was disappointing, Home Depot said it will slightly beat the consensus estimate for its full-year earnings. The company raised its 2010 guidance to $1.88 a share up from a previous estimate of $1.79. Analysts had been expecting $1.87 a share. Home Depot added that it expects sales to rise by 3.5% this year. The company's previous estimate called for a 2.5%.

Sales at stores open at least a year jumped 3.3% during the quarter, the first quarterly increase for that metric in almost five years and individual transactions increased by 4.2%, also the biggest increase in almost five years. The shares were still down 2.4% on the day.

Home Depot Chart

Wal-Mart, the world's largest retailer, said its first-quarter profit surged 10% to $3.32 billion, or 88 cents a share, from $3.02 billion, or 77 cents a share, a year earlier. Same-store sales fell by 1.4%, marking the fourth consecutive quarter Wal-Mart has reported a decline in that metric. That decline is especially disappointing given that those four quarters cover a recession and only the nascent stages of a recovery. What I mean is if Wal-Mart cannot lure shoppers in during a recession, that may not bode well for the stock going forward.

Wal-Mart has the feeling a ''Dog of the Dow'' or to be more candid, dead money. The shares have been significantly outpaced by a variety of retailers, both high-end and not-so-high-end, over the past year. Dollar General (DG), Family Dollar (FDO), Nordstrom (JWN) and Tiffany (TIF) all outperformed Wal-Mart by at least four-fold in the past year.

The company said it expects to earn 93 cents to 98 cents a share in the current, but that is not very exciting given that analysts were already expecting 98 cents. Showing what a fickle beast the stock market is, it would have been logical to expect that Wal-Mart would trade lower today, but the stock was the only one of the 30 Dow stocks to finish the day in positive territory, gaining almost 2% to close at $53.71.

Wal-Mart Chart

As I mentioned in the headline for this wrap, in the absence of ample headlines to explain the day's declines, it was the same old songs sending the bulls running for cover, namely declining commodities prices and Europe-related fears. I am not sure if the commodities/materials/energy trade is taking a break or if it is broken beyond repair (at least for the near- to medium-term), but is obvious that these names that helped lead the market higher pre-financial crisis only to be among the biggest losers in 2008 and early 2009, may be repeating that pattern.

Materials names were among the leaders off the March 2009 lows and they are again contributing some of the biggest declines. Oil looked like it was starting to firm a bit in overnight trading, but that rally was short-lived and NYMEX-traded crude for June delivery, closed at $69.41 a barrel, after falling as low as $68.91. That is good for the lowest closing price since Sept. 29, 2009, according to the Wall Street Journal. Crude has declined in 10 of the past 11 trading sessions, the longest skid since October 2003, the Journal reported.

Yes, the crude charts look crude these days (pun intended), but copper futures did see some relief after several weeks of intense selling pressure. Copper for July delivery gained 9.9 cents to close at $3.031 per pound after the Commerce Department said housing starts rose by 672,000 in April. That was copper's biggest gain in seven weeks, according to Bloomberg News.

Copper Chart

Of course Europe is still manufacturing headlines that send the bulls running for cover. Today, it was Germany's turn to roil equity markets by announcing a ban on naked short-selling. Germany's financial regulator BaFin said the ban starts at midnight tonight in Germany and applies to equities as well as naked credit default swaps on Eurozone government bonds. The ban will also apply to Germany's 10 largest banks and insurance providers and will last until March 31, 2011.

You may remember that the SEC's short sale ban in 2009 proved futile and it served to spook investors about how bad things really were at the time. While bans on short-selling are well intended, particularly if the bans target naked shorts, a far more devious group than regular bears, the bans can be avoided by astute traders. Just because there was a ban on short selling in the U.S. in 2009 did not mean that proprietary trading desks and hedge funds could not short U.S.-listed stocks and the same will be true of Germany's ban. It may hamper shorting of Franfurt-listed stocks, but many of Germany's biggest names trade on other major exchanges, including a few here in the States, so this action is likely to see muted success.

The unintended consequence of Germany's plan to enact tighter control on naked shorts is that the plan has many a pundit speculating that Europe's largest economy may be hiding something. Look at the impact problems in Greece and Portugal have had on global equity markets. Now imagine if Germany, a larger and more important player on the global economic stage, says that its economic house is not in order.

I am not saying that is going to happen, but if Germany continues to spook investors, the fallout will certainly be ugly. All of this is a roundabout way of saying that the iShares MSCI Germany Index (EWG) is worth watching as a potential short. The ETF was down almost 1.5% today on almost six times the average daily volume.

After the bell, Dow component Hewlett-Packard (HPQ), the world's largest personal computer and printer maker, said it earned $2.2 billion, or 91 cents a share in its fiscal second quarter, compared with $1.7 billion, or 71 cents a share, a year earlier. Excluding items, HP earned $1.09 a share, beating the consensus estimate of $1.05. Sales jumped 13% to $30.8 billion, beating the consensus estimate of $29.8 billion.

Weakness among large-cap tech names has been lamented in this space for several weeks, so I would not expect the HP report to lift the sector at large, but is should be noted that the company did offer some bullish full-year guidance. HP said it expects to earn $4.45-$4.50 a share, up from previous guidance of $4.37-$4.44.

The company said it is seeing an uptick in orders from small businesses and financial services firms, but that a true recovery in PC demand from large corporate customers will not be seen until the second half of this year. After losing 1.54% during the regular trading session, HP shares were up 2.44% to $47.93 in after-hours trading.

HP Chart

Taking a look at the charts, last night I mentioned 10,350 as the next support area for the Dow and with today's close just above 10,500, we could be seeing just how strong support at 10,350 is before the end of the week. From there, the 200-day moving average at 10,248 would be the next area to watch on the downside. The HP news on its own is not enough to counter falling oil prices and a tumbling Euro.

Dow Chart

The Germany naked short ban was not good news for financials, regardless of home domicile, and that news pressured the S&P 500 Seventy eight of the index's 79 financial names traded lower on Tuesday and as is the case with the Dow, we could be seeing how strong the next critical support level is for the S&P 500. By that I mean 1100 or 1101.58 if we are splitting hairs about the 200-day line. Either way, if the aforementioned negative catalysts persist and there is little reason to believe they will not, 1100 could be seen in short order.

S&P 500 Chart

The Nasdaq is offering no shelter from the storm. On Tuesday, only seven of the Nasdaq 100 stocks finished the day in positive territory and not one of them was a marquee name like Apple (AAPL), Amazon (AMZN) or Google (GOOG). If Wednesday does not bring some positive trade, the Nasdaq could be testing support at 2300 tomorrow.

Nasdaq Chart

I mentioned last night that I found the strength in small-caps to be suspicious, but Tuesday's trade highlighted some dents in the armor with the Russell 2000 absorbing the biggest percentage loss of the major U.S. indexes. The close at 682.75 puts the Russell 2000 well below its 50-day moving average of 698.64. That is still a good bit above support at 650, but the other side of that coin is that small-caps merely have more selling ahead of them.

Russell 2000 Chart

I said last night that I saw no reason to be bullish about stocks right now and my tune has not changed in 24 hours. Germany announced its naked short selling ban after European markets closed, so I would expect markets there to open lower tomorrow, putting pressure on U.S. index futures. Minutes from the Fed's latest meeting will be released at 2PM Eastern time tomorrow, so Wednesday may be an ideal day to take a breather and stay on the sidelines.