RTTNews - Following a steep slide at the opening bell, stocks are continuing to tread in the red in early afternoon trading on Monday, as trader confidence in an imminent economic recovery was shaken by last week's disappointing data on the health of the consumer. The major averages remain firmly in negative territory, although they have moved off of their worst levels of the day.
Additional selling pressure was also generated by news that Lowe's (LOW) reported second quarter earnings and revenues that fell short of estimates. The home improvement retailer also provided disappointing guidance.
Some of the pessimism was mitigated by the release of a report from the Federal Reserve Bank of New York showing that conditions for New York manufacturers improved for the first time in well over a year in the month of August.
This afternoon, traders will look to the results of the National Association of Home Builders' survey on builder confidence in August. The index is composed of figures on sales of new homes, prospective home sales expected in the next six months, and buyer traffic. The data is scheduled to be released at 1 p.m. ET.
The major averages have seen little change since moving off of their worst levels of the day in late morning dealing. The Dow is currently down 153.34 at 9,162.92, the Nasdaq is down 47.40 at 1,938.12 and the S&P 500 is down 20.35 at 983.74.
The resource sector continues to disappoint, with steel, gold and oil service stocks puling back by considerable margins. The retreat comes amid a drop in commodities prices on the NYMEX, where gold has plunged by $16.10 to $932.60 an ounce and crude oil is down $2.17 at $65.34 per barrel.
Real estate stocks are also seeing a particularly weak outing, with the Morgan Stanley REIT Index posting a loss of 4.1 percent. The decline is pulling the index further off the nine-month closing high set earlier this month.
The pullback comes after Oppenheimer downgraded a number of stocks in the sector. Notably, shares of Biomed Realty Trust (BMR) are falling sharply after Oppenheimer lowered its rating on the stock to Perform from Outperform. Biomed is down by 7.8 percent, pulling back off its best closing level in over nine months.
While networking, banking and transportation stocks are also moving sharply lower, health insurance stocks are continuing to defy the day's downward move. The Morgan Stanley Healthcare Payor Index is up by 3.3 percent, reaching its best intraday level in ten months.
The gains by health insurance stocks come after President Obama and other administration officials made comments over the weekend suggesting that they are stepping back from the insistence that a public insurance option needs to be part of health care reform.
Stocks In The News
Corrections Corp. of America (CXW) is retreating after the company announced that John Ferguson, the company's CEO, would retire on October 15, 2009 and be replaced by COO Damon Hininger. Ferguson will remain Chairman of the Company's Board of Directors. The stock is down by 4.6 percent, backing off of last week's ten-month closing high.
Illinois Tool Works (ITW) is also moving lower after the company reported a 24 percent operating revenue decrease for the quarter ended July 31, 2009. The stock is falling by 2.8 percent, pulling back off the ten-month closing high set late last week.
On the other hand, Travelzoo (TZOO) is on the rise after the firm entered an agreement to sell its Asia Pacific division to former CEO and majority stockholder Ralph Bartel. Shares of the Internet media firm are up by 3.6 percent hovering near last week's 18-month closing high.
In Focus: Economic & Corporate News
As mentioned above, the New York Fed said its general business conditions index rose to 12.1 in August from a negative 0.6 in July, with a positive reading indicating an expansion in the manufacturing sector. Economists had been expecting the index to increase more modestly to 3.0.
Commenting on the data, Peter Boockvar, equity strategist for Miller Tabak, said, Net-net, the data is evidence that manufacturing will help lead the way to positive GDP in Q3.
On the earnings front, Lowe's reported second quarter net earnings of $0.51 per share compared to $0.63 per share in the same period last year. Wall Street expected the company to earn $0.54 per share for the quarter. The home improvement retailer also provided disappointing guidance.
In other news, online broker Charles Schwab (SCHW) is in focus after the company revealed that it would vigorously defend itself in court against allegations by New York Attorney General Andrew Cuomo regarding the company's sale of Auction Rate Securities, or ARS, to retail clients.
According to reports, China Investment Corp. is planning to pump around $2 billion into the U.S. mortgage system by hiring mandates under the U.S. Treasury-backed Public-Private Investment Plan or PPIP.
In overseas trading, stock markets across the Asia-Pacific region finished considerably lower on Monday. Japan's benchmark Nikkei 225 Index slid by 3.1 percent, while Hong Kong's Hang Seng Index fell by 3.6 percent.
The major European markets also closed notably lower, with the French CAC 40 Index and the German DAX Index falling by 2 percent and 2.1 percent, respectively, while the U.K.'s FTSE 100 Index slipped by 1.5 percent.
In the bond markets, treasuries are hovering near their best levels of the day. Subsequently the yield on the benchmark ten-year note is trading at 3.480 percent, posting a loss of 7.7 basis points on the day.
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