U.S. stocks skidded Tuesday on fresh signs that global credit markets were seizing up, while a lower profit forecast from Wal-Mart Stores Inc. (WMT) renewed worries about consumer spending.

Wal-Mart's pessimistic outlook and subsequent news that a U.S. investment firm wants to halt redemptions delivered a one-two punch to already shaky confidence.

In the latest sign of a deteriorating credit environment, Sentinel Management Group Inc., which oversees about $1.6 billion in assets, told clients it wants to stop investors from withdrawing their cash to avoid forced liquidation.

"Sentinel caught the biggest headlines today, and there were rumors about more liquidity issues and more distress concerning the investment banks," said David Katz, chief investment officer at Matrix Asset Advisors in New York.

"The market is shooting first and asking questions later, and as in the past weeks, weakness has begotten more weakness."

The Dow Jones industrial average tumbled 207.61 points, or 1.57 percent, to 13,028.92 — its lowest close since April 24.

The Standard & Poor's 500 Index slid 26.38 points, or 1.82 percent, to 1,426.54, leaving it up just 0.6 percent for the year. The S&P 500 hit a lifetime high on July 16, and on that date, it was up 9.7 percent for the year.

The Nasdaq Composite Index slumped 43.12 points, or 1.70 percent, to 2,499.12, closing below the 2,500 mark for the first time since April 13.

The yield on the benchmark 10-year note slipped 3 basis points to 4.73 percent — a full 60 basis points below a June high — the biggest two-month drop in yields for nearly a year.

Reflecting the punishing day in the stock market, losers beat winners by a ratio of about 8 to 1 on the New York Stock Exchange and by 3 to 1 on the Nasdaq. Trading was moderate on the NYSE, with about 1.8 billion shares changing hands, below last year's estimated daily average of 1.84 billion, while on Nasdaq, about 1.98 billion shares traded, below last year's daily average of 2.02 billion.

WAL-MART WOES

Wal-Mart blamed pressure from the housing market for its disappointing earnings report and the reduction in its full-year earnings forecast, sending its shares down 5.1 percent to $43.82, leading decliners in the S&P.

Home Depot Inc (HD) shares dropped 4.9 percent to $33.52 after the home improvement store reported its first quarterly sales decline in more than four years as the housing market softened. The S&P retail index slid 3.6 percent to 454.93, an 11-month low.

Boeing Co. (BA) was the top drag on the Dow, partly on concern that some orders for its planes hinge on financing that could be threatened by the credit market turmoil. Its shares fell 2.4 percent to $97.63 on the NYSE.

FINANCIAL PAINS

Inflicting further pain on financial stocks was news that a Canadian trust couldn't find the funds it needed to repay outstanding asset-backed commercial paper and that a bank had declined to provide liquidity.

And Swiss bank UBS, the world's largest wealth manager, warned that market turmoil was likely to hit its investment banking business in the second half of the year.

Stocks of large brokerages were some of the sharpest losers in the S&P 500, with the broker dealer index down 3.1 percent. Shares of Goldman Sachs (GS) fell 4.4 percent to $169.75, while Lehman Brothers lost 6.3 percent to $53.67.

Shares of Countrywide Financial Corp. (CFC), the largest U.S. mortgage lender, skidded 8.1 percent to $24.46 after the company said foreclosures and delinquencies rose in July to their highest level in at least several years.

The battering of home builders' stocks did not let up, with the Dow Jones U.S. home construction index slumping 4.5 percent.

A rare bright spot was software maker VMware Inc., whose shares soared 75.9 percent to close at $51 in its NYSE trading debut. At its session high of $55.50, VMware's stock was up 91 percent from its IPO price of $29.

The Dow average was a sea of red, with Exxon Mobil (XOM) the only one of the 30 components ending higher as it benefitted from rising oil prices. Its shares rose 0.3 percent to $83.13. U.S. crude oil for September delivery gained 76 cents to settle at $72.38 a barrel.

In economic news, rising energy costs drove up U.S. producer prices last month, while the trade deficit unexpectedly narrowed in June on stronger exports, according to reports, suggesting the Federal Reserve will remain cautious about cutting interest rates.