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* AT&T shares hit one-month low

* Indexes: Dow down 0.19%, S&P down 0.13%, Nasdaq up 0.4% (Adds comment, details; updates prices)

By Echo Wang

May 18 (Reuters) - The S&P 500 declined slightly on Tuesday after major retailers including Walmart and Home Depot posted better-than-expected earnings alongside a sharp decline in telecom stocks and weak housing starts data.

AT&T Inc shed 5.76%, the top drag on the benchmark S&P 500, as it extended declines from Monday, when the telecoms firm said it would cut its dividend payout ratio as a result of its $43 billion media asset deal with Discovery Inc.

T-Mobile and Verizon Communications also dropped 2.42% and 1.30%.

The three main indexes opened higher after Walmart, the world's biggest retailer, raised its full-year earnings forecast and Home Depot reported quarterly same-store sales above estimates.

"Those are both emblematic of strength in the corporate sector and also of the consumer. I mean, you can't have Walmart and Home Depot have blowout earnings without the consumer really stepping up spending stimulus checks, adopting ecommerce, as well as getting back into stores", said Ross Mayfield, investment strategist at Baird in Louisville, Kentucky. "And a lot of the bull thesis for the market right now is still built on a really strong reopening of the economy."

Despite its strong results, Home Depot's shares were down 0.6%, under pressure due to the lack of a solid outlook and the housing data.

Latest data showed U.S. homebuilding fell more than expected in April, likely pulled down by soaring prices for lumber and other materials.

Wall Street has been volatile in recent days, with investors worried that an overheating economy could prompt the Federal Reserve to rein in its monetary support following a spike in volatility last week after strong inflation readings.

The benchmark S&P 500 is about 2% from its record high close on May 7, while the tech-heavy Nasdaq is about 5% from its April 26 record high close.

Fund managers recently trimmed their overweight positions on technology stocks to a three-year low as inflation worries left growth stocks vulnerable to a pullback, and turned overweight on UK stocks for the first time in seven years, a survey from Bank of America showed.

Minutes from the Fed's April policy meeting will be parsed on Wednesday for the central bank's view of the economy.

By 2:18PM ET, the Dow Jones Industrial Average fell 64.3 points, or 0.19%, to 34,263.49, the S&P 500 lost 5.45 points, or 0.13%, to 4,157.84 and the Nasdaq Composite added 53.84 points, or 0.4%, to 13,432.89.

Advancing issues outnumbered declining ones on the NYSE by a 1.30-to-1 ratio; on Nasdaq, a 1.85-to-1 ratio favored advancers.

The S&P 500 posted 42 new 52-week highs and no new lows; the Nasdaq Composite recorded 100 new highs and 37 new lows.

(Reporting by Echo Wang in New York; Additional reporting by Medha Singh and Shashank Nayar in Bengaluru; Editing by Maju Samuel and Aurora Ellis)