US STOCKS-Wall St sinks, set for first monthly loss since August

* Mattel (NasdaqGS: MAT - news) shares plunge after fourth-quarter results

* Wal-Mart cuts outlook; shares off in premarket trade

* Indexes off: Dow 1.2 pct; S&P 0.9 pct; Nasdaq 0.8 pct

By Angela Moon

NEW YORK (Frankfurt: HX6.F - news) , Jan 31 (Reuters) - U.S. stocks retreated on Friday, on course for their first monthly decline since August, in the wake of weak earnings reports by companies like Amazon and Walmart and concerns about declining currencies in emerging markets.

Amazon.com Inc shares plunged more than 7 percent to $373.52 a day after the company missed Wall Street's estimates for the crucial holiday period. The online retailer also cautioned investors about a possible operating loss this quarter as shipping costs climb.

Wal-Mart Stores Inc shaved its outlook for the fourth quarter and full year to account for special items, including those tied to store closures and the restructuring of Sam (Paris: FR0011660836 - news) 's Club. The stock fell 1 percent to $73.93.

Global equity markets have been weighed recently by the outlook for emerging markets. A rout in emerging currencies has spurred some central banks to raise interest rates or intervene in markets to limit the swings, in turn pressuring bond and stock holdings and forcing investors to exit.

The S&P 500 is down nearly 4 percent for the month, the biggest decline since May 2012.

"Interest rate increases from Turkey, India and South Africa this week alone served to briefly spark vigor back into investors' strides," said Andrew Wilkinson, chief market analyst at Interactive Brokers LLC in Greenwich, Connecticut.

"However, the week is ending on a bad note as investors reflect on the earlier catalyst indicating potential sluggish growth for the world's number two economy, China. And so pressure has now returned to haunt the key emerging market currencies whose central banks have so far raised the cost of borrowing but pressure valves are also now being tested elsewhere."

The Dow Jones industrial average fell 192.82 points, or 1.22 percent, to 15,655.79, the S&P 500 lost 16.23 points, or 0.9 percent, to 1,777.96 and the Nasdaq Composite dropped 32.832 points, or 0.8 percent, to 4,090.293.

Among other earnings news, MasterCard Inc reported a 3 percent rise in quarterly profit but missed analysts' average forecast as expenses rose. The stock fell 5.2 percent to $75.62.

Mattel Inc shares declined about 9.5 percent to $38.93 after the world's largest toy company said quarterly profit missed Wall Street's estimates.

Google Inc (NasdaqGS: GOOG - news) 's quarterly revenue beat Wall Street's target despite an ongoing decline in prices for its online ads and deepening losses at Motorola, the handset-making division to be sold to China's Lenovo. Google shares were up 3.8 percent at $1,179.25.

DATA IN EUROPE, U.S.

Inflation in the euro zone slowed this month to 0.7 percent from 0.8 percent in December, confounding expectations for a rise to 0.9 percent and matching a low hit last October. The European Central Bank responded by cutting its interest rates to record lows.

An unexpected drop in euro zone inflation raises pressure on the ECB to consider fresh policy action next week to counter deflation risks and support a weak euro zone recovery that may be running out of steam.

Meanwhile, data in the U.S. showed consumer sentiment dipped slightly in January, with recent economic improvement not translating to expectations for future gains.

Another report showed U.S. labor costs rose in the fourth quarter but there was still little sign of wage inflation amid slack in the jobs market.

Zynga Inc (NasdaqGS: ZNGA - news) shares jumped nearly 20 percent to $4.26. The company will shed 15 percent of its workforce to slash costs and buy mobile game developer NaturalMotion for $527 million to refresh a stalled games pipeline.