With traders reacting negatively to some weaker than expected retail sales data, stocks are seeing considerable weakness in mid-morning trading on Wednesday. The major averages are all posting steep losses after ending the previous session mixed.
The weakness in the markets comes as traders digest a report from the Commerce Department showing that retail sales fell for the second consecutive month in April after showing back-to-back increases in the first two months of the year.
The report showed that retail sales fell 0.4 percent in April following a revised 1.3 percent decrease in March. Economists had expected sales to come in unchanged compared to the 1.2 percent decrease originally reported for the previous month.
Noting that the increases in sales seen earlier this year were the most significant green shoots in the economic landscape, Chris Low, chief economist at FTN Financial, said, Unfortunately, it now looks as if they were killed by an early frost.
Back-to-back declines in sales in March and April throw the economic recovery into doubt, Low added.
In other economic news, the Commerce Department released a separate report showing another notable decrease in business inventories. The report showed that business inventories fell 1.0 percent in March following a revised 1.4 percent decrease in February.
Meanwhile, shares of Intel (INTC) are moving moderately higher even though the European Commission fined the semiconductor giant a record 1.06 billion euros for allegedly abusing its dominant position on the market for computer chips known as x86 central processing units.
Intel president and CEO, Paul Otellini said the company takes strong exception to the decision, arguing that the decision ignores the reality of a highly competitive microprocessor marketplace. Otellini added that Intel would appeal the decision.
Separately, Treasury Secretary Timothy Geithner offered an optimistic outlook for the financial system Wednesday, telling a meeting of community bankers that the financial system is beginning to heal.
Geithner delivered remarks to community bankers on the increased confidence in the banking system, adding that concerns about systemic risk have been substantially reduced.
While the major averages have moved well off their worst levels of the day, they currently remain stuck firmly in negative territory. The Dow is currently down 119.47 at 8,349.64, the Nasdaq is down 24.30 at 1,691.62 and the S&P 500 is down 14.74 at 893.61.
Steel stocks are extending recent losses, helping to lead the markets lower amid concerns about the economic outlook. The Amex Steel Index is currently down 5.3 percent, continuing to pull away from its highest level of the year, set late last week.
The steel sector is being weighed down by shares of Cliffs Natural Resources Inc. (CLF), which are down by 14.5 percent on the day. The loss by Cliffs comes after BMO Capital Markets downgraded its rating on the stock to Market Perform from Outperform.
Weakness has also been prominent in shares of AK Steel Holding Corp. (AKS) and Rio Tinto Plc. (RTP), which are down by 7.8 and 7.2 percent respectively.
Banking stocks are also seeing further downside, dragging the Kbw Bank Sector Index down 3.4 percent on the day. With the retreat, the index continues to move off of its four-month closing high set last Friday.
Shares of Marshall & Ilsley (MI) and Huntington Bancshares (HBAN) are leading the declines in the sector, falling by 7.4 and 8.9 percent, respectively.
Significant weakness has also emerged in the housing sector, as reflected by the 4.2 percent loss currently being shown by the Philadelphia Housing Index. Transportation, real estate, and oil service stocks are also posting notable losses.
On the other hand, pharmaceutical stocks are pushing the Amex Pharmaceutical Index up 1.8 percent, with shares of Merck (MRK) up 4.3 percent as the firm gears up for the launch of a new antipsychotic drug.
Stocks Driven By Analyst Comments
Moving further off their recent highs, shares of Sonoco Products (SON) have come under considerable pressure in morning trading. The packaging products maker is currently down 4.2 percent, pulling back further off the six-month closing high it set last Friday.
The loss by Sonoco comes after KeyBanc Capital Markets downgraded its rating on the company's stock to Hold from Buy. KeyBanc attributed the downgrade to concerns about the stock's valuation in light of weakness in the industrial segment.
Shares of Celanese (CE) are also seeing significant weakness after Citigroup downgraded its rating on the chemical company to Hold from Buy. Celanese is currently down 7.6 percent, pulling back further off last week's seven-month closing high.
On the other hand, shares of Abercrombie & Fitch (ANF) are currently up 3 percent after Jefferies upgraded its rating on the teen apparel retailer to Buy from Hold. Jefferies said that the company's risk profile is now more favorable.
In overseas trading, stock markets across the Asia-Pacific region turned in another mixed performance on Wednesday. While Japan's benchmark Nikkei 225 Index closed up 0.5 percent, Hong Kong's Hang Seng Index slipped 0.6 percent.
Meanwhile, the major European markets are all moving lower, pulling back further off their recent highs. The U.K.'s FTSE 100 Index is receding 1.6 percent, while the French CAC 40 Index and the German DAX Index are down 1.7 percent and 2.3 percent, respectively.
In the bond market, treasuries are moving higher following the weak retail sales data and the sell-off on Wall Street. Subsequently, the yield on the benchmark ten-year note is currently down 4.8 basis points at 3.127 percent.
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