House Poor

Lowe's first quarter profit—let's be glad that it had one—actually beat expectations by a few pennies. Its forecast for second quarter profit was a bit below expectations, though, and that was enough to send shares of the second-largest home improvement company down $1.07, or 4.1 percent, to $25.01.

Lowes reported a profit of 34 cents a share for the first quarter, beating the street's target of 31 cents a share. Looking ahead to the crucial second-quarter, traditionally its biggest of the year, the company targeted earnings of 57 cents to 59 cents a share, which is below the 61 cents that investors were hoping to see.

The company sounded a cautious note in its earnings release:

• “Consumers are showing signs of reengagement in home improvement, including discretionary projects and purchases of bigger ticket products, which had taken a back seat during the worst of the economic downturn,” commented Robert A. Niblock, Lowe's chairman and CEO. “This, combined with the government stimulus programs and favorable weather in March and April, drove solid quarterly sales and earnings that exceeded our guidance. “While we are optimistic we will experience solid demand through the balance of the year, we view 2010 as a year of transition for our industry."

Lowe's led the retail sector lower on Monday, as investors wondered if the recovery of the economy might be slowing down amid financial turmoil in Europe and the end of government support for the housing market in the U.S. Home Depot, which is scheduled to report results on Tuesday, will provide another useful data point on economic activity.

There already are signs that manufacturing in the New York area has slowed, possibly due to the contraction of export markets in the U.S. The troubling economic signals in the U.S. and the ongoing financial crisis in Europe were enough to send stocks lower in the U.S., where the Dow was down 0.6 percent in late morning trading.