U.S. consumers feeling the pressure

Fresh signs emerged Tuesday thatconsumers arespending a little more cautiously, as a pair of big retailers both reported business slowdowns.

Wal-Mart, the world's largest retailer, cut its full-year profit forecast as it released lower-than-expected earnings for the second quarter.

Wal-Mart CEOLee Scott said consumers are pulling back in the face of tougher economic times.

"It is no secret that many customers are running out of money toward the end of the month," Scott said on a recorded conference call.

He saidhigher gasoline prices and higher interest rates are among the factors hurting Wal-Mart's sales in the United States and Canada.

Wal-Mart lowered its profit expectations from continuing operations for the year toa range of $3.05 US to $3.13 US a share. That's a drop of 10 cents US from its previous outlook.

The world's biggest home improvement retailer, Home Depot, also warned Tuesday that U.S. consumers were feeling squeezed.

It reported lower second-quarter earnings, blaming a weaker housing market.

"While the challenging housing market continues to present us with a tough selling environment, our financial performance was in line with our expectations," said Home Depot CEO Frank Blake in a statement.

"We believe the housing and home improvement markets will remain soft into 2008," he said.

Sales at Home Depot stores open at least a year fell by 5.2 per cent.

Clment Gignac, chief economist at National Bank Financial, has boostedthe odds of a recession in the U.S. to 50 per cent.

"A consumer-led recession in the U.S. is likely to mean strong headwinds for Canadian banks as loan losses jump from historical lows," he wrote in a note to clients Tuesday.