RTTNews - After a strong outing in the previous session, stocks saw choppy trading on Tuesday, finishing largely on the downside for the day. The major averages were unable to sustain any major moves, with the Dow and S&P 500 drifting into negative territory just ahead of the closing bell on Wall Street.

Stocks showed lack of conviction on the day, despite disappointing housing data released earlier in the day.

Traders digested data from the U.S. Commerce Department showing a decline in housing starts in April to an annual rate of 458,000 units, compared to March's revised rate of 525,000 units.

Economists had forecasted the figure to rise to a pace of 540,000 units from the rate of 510,000 units originally reported for March. The report showed that building permits were also down, slipping by 3.3 percent to an annual rate of 494,000 units.

In an interview with RTT News, Keith Hembre, chief economist with First American Funds, said home construction is reaching a bottom with the latest decline. I think we're to the point where building activity has been brought down about as low as it's going to go...I don't think we should look for a robust reacceleration anytime soon.

Later in the day, President Barack Obama announced his goal for new fuel standards, proposing regulations that would require an average fuel economy of 35.5 miles per gallon for automobiles beginning in the year 2016.

The new standards, covering car models ranging from 2012 to 2016, will require an average fuel economy standard of 35.5 mpg by the year 2016. The plan is projected to save 1.8 billion barrels of oil over the life of the program, with fuel economy gain averaging more than 5 percent per year. Further, the program will lead to a reduction of approximately 900 million metric tons in greenhouse gas emissions, the White House said.

On the earnings front, Dow component Hewlett Packard (HPQ) reported second quarter results shortly after the closing bell. The firm posted a net income of $1.7 billion or $0.70 per share, compared to $2.1 billion or $0.80 per share in the prior year period. Adjusted earnings for the quarter were $2.1 billion or $0.86 per share, compared to $2.2 billion or $0.87 per share in last year quarter.

On average, 25 analysts polled by Thomson Reuters expected the company to report earnings of $0.86 per share.

Meanwhile, Home Depot (HD) reported first quarter results that edged out Wall Street estimates. The company reported earnings for the quarter at $587 million or $0.35 per share compared to an earnings forecast of $0.29 per share.

Medtronic (MDT), the world's largest medical technology firm, reported fourth quarter earnings at $0.22 per share, including one-time charges. However, leaving out these items, the profit met expectations with a figure of $0.82 per share.

In other news, three major banks intend to apply to repay funds borrowed under the government's TARP program, adding to trader speculation that the financial crisis may be easing.

Specifically, financial giants Goldman Sachs (GS), JPMorgan Chase (JPM) and Morgan Stanley (MS) look to repay the bail-out funds received under the TARP program in October. The three firms have received a total of $45 billion in government aid. The government is expected to announce the results of the firms' filings no later than June 8th.

The major averages had a shaky outing, finishing on opposite sides of the unchanged line. The Dow closed lower by 29.23 at 8474.85, while the S&P 500 closed down by 1.58 at 908.13. On the other hand, the Nasdaq was able to hold on to thin gains, finishing up by 2.18 at 1734.54

Sector News

Banking and tobacco stocks showed considerable weakness, pulling down the Dow Jones Bank Sector Index and Amex Tobacco Sector Index by 3.9 and 1.7 percent, respectively. Also helping to lead the major averages lower were real estate, housing, and airline stocks.

Some major sectors were able to hold on to their gains helping to minimize the pullback seen in Tuesday's session.

Healthcare provider stocks turned in one of the best performances of the day, as reflected by the 4.9 percent gain shown by the Morgan Stanley Healthcare Provider Index for the session.

Gold stocks also posted notable gains on the day, with the Amex Gold BUGS Index closing up by 2.7 percent. Significant strength was also evident in steel stocks, with the Amex Steel Index climbing by 3.4 percent on the day.

Dow Components

Dow components were mostly negative, pushing the blue chip index just below the unchanged line on the day.

The Dow was dragged down by shares of Home Depot (HD) which fell by 5.3 percent. The company reported better-than-expected earnings but reduced its earnings per share and revenue outlook for the fiscal year 2009. With the day's move the stock has given back nearly all of its recent gains.

Notable weakness was also present in shares of American Express (AXP) and Bank of America (BAC) which fell by 5.1 and 4.0 percent, respectively.

Limiting the losses in the Dow were shares of General Motors (GM) and Citigroup (C), up by 7.6 and 3.5 percent, respectively. Shares of Alcoa (AA) also saw seeing notable upside, rising by 2.0 percent on the day. The firm was speculated to benefit from the government's new automobile emission regulations, likely to raise demand for lightweight steel used for car production.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region finished higher on Tuesday. Japan's benchmark Nikkei 225 Index rose by 2.7 percent, while Hong Kong's Hang Seng Index climbed 3.0 percent.

Meanwhile, the major European markets turned in largely modest gains on the day. The French CAC 40 Index closed up 0.9 percent, while the German DAX Index also rose, finishing up by 2.2 percent. Meanwhile, the U.K.'s FTSE 100 Index also saw some strength on the day, closing up by 0.8 percent.

In the bond markets, treasuries moved off of their worst levels of the day, but closed in firmly negative territory. Subsequently, the yield on the benchmark ten-year note finished up 3.2 basis points at 3.243 percent.

Looking Ahead

With a relatively light economic calendar on Wednesday, traders will pay close attention to the release of minutes from the Federal Open Market Committee's April meeting.

Market players will look to the minutes to gain some near-term economic outlook and any hint of policy moves by the Fed.

The minutes are scheduled for release at 2:00 p.m. ET.

Also on Wednesday, bond market players will look to more quantitative easing measures from the Federal Reserve. The New York arm of the Federal Reserve is set to buy treasuries with maturity dates ranging from February of 2016 to May of 2019. The purchase is scheduled to begin at 10:15 a.m. ET.

Monday, The New York Fed purchased $3.18 billion worth of securities with maturity dates ranging from August of 2019 to February of 2026.

The day's buyback attracted strong interest, with a total of $15.22 billion in treasuries submitted for the purchase.

With the purchase, the government has bought back $107.87 billion in treasuries since the purchase program began on March 25th.

For comments and feedback: contact editorial@rttnews.com