Stocks Close Mixed Following Choppy Trading Day - U.S. Commentary

By @ibtimes on

Stocks showed some volatility over the course of the trading day on Tuesday, with the major averages having difficulty sustaining any significant moves before ending the session mixed. The choppy trading came as traders expressed some uncertainty about the outlook for the markets.

While stocks initially moved higher following the weakness that was seen in the previous session, buying interest waned not long after the open. The major averages subsequently pulled back off their highs for the session and into negative territory.

The pullback by the markets was partly due to concerns about the outlook for General Motors (GM), which moved sharply lower on the day to reach its lowest levels since the depression.

The loss by GM came as traders worried that the company is on the verge of filing for bankruptcy after several company executives revealed that they sold their GM stock and liquidated their remaining direct holdings in the company.

Shares of rival Ford (F) also came under pressure after the automaker announced a public offering of 300 million shares of its common stock. Ford closed down 17.6 percent, pulling back further off the ten-month closing high it set last week.

Commenting on the pullback by stocks in an interview with RTT News, Donald Selkin, chief investment strategist at National Securities, noted that the market needs to exhale a little bit and allow for some profit taking.

Selling pressure remained somewhat subdued, however, and stocks showed a notable move back to the upside in late day trading. The major averages all moved well off their worst levels of the day, with the Dow climbing firmly into positive territory.

In economic news, the Commerce Department released a report earlier in the day showing that the U.S. trade deficit for March came in wider than in the previous month, with the value of exports falling by more than the value of imports.

While the report showed that the trade deficit widened to $27.6 billion in March from a revised $26.1 billion in February, economists had expected the deficit to widen to $29.0 billion.

Separately, a report from the Trustees for Medicare and Social Security showed that the funds that the programs rely on are being depleted at a faster rate than originally forecast

At the updated rate, Medicare's expenses will exceed taxpayer revenue in 2017, two years ahead of the earlier estimate, while Social Security's trust fund will be wiped out in 2037, four years ahead of the earlier estimate.

The major averages eventually ended the session mixed, with the Dow posting a moderate gain. While the Dow closed up 50.34 points or 0.6 percent at 8,469.11, the Nasdaq fell 15.32 points or 0.9 percent to 1,715.92 and the S&P 500 closed down 0.89 points or 0.1 percent at 908.35.

Sector News

After bucking the downtrend by the broader markets earlier in the session, gold stocks saw continued strength in afternoon trading. The Amex Gold Bugs Index ended the session up 3.9 percent, at its best closing level in over seven months.

A notable increase by the price of gold contributed to the strength in the sector, with gold for June delivery closing up $10.40 at $923.90 an ounce. The precious metal benefited from some weakness in the value of the U.S. dollar.

Significant strength also emerged in the tobacco sector, as reflected by the 2.5 percent gain posted by the Amex Tobacco Index. Lorillard (LO) and Philip Morris (PM) turned in two of the sector's best performances.

While some pharmaceutical and chemical stocks also moved higher over the course of the trading day, considerable weakness remained visible among airline stocks. The Amex Airline Index closed down 4.3 percent, pulling back further off its recent highs.

Banking stocks also remained stuck firmly in negative territory, resulting in a 4.2 percent loss by the Kbw Bank Index. SunTrust Banks (STI) and Regions Financial (RF) posted notable losses.

Stocks in the semiconductor, housing, and electronic storage sectors also ended the day mostly lower. SanDisk (SNDK) helped to lead the storage sector lower, falling 6.2 percent.

Dow Components

A majority of the Dow components climbed into positive territory in late day trading, contributing to the strong upward move by the blue chip index.

Pfizer (PFE) helped to lead the way higher, with the drug giant closing up 5.5 percent after a Credit Suisse analyst made some positive comments about the company's planned acquisition of rival Wyeth (WYE). With the gain, Pfizer set a three-month closing high.

The rally by the Dow was also partly due to strong gains by Coca-Cola (KO) and Microsoft (MSFT). Shares of Coca-Cola ended the session up 3.9 percent, while shares of Microsoft rose 3 percent on the day.

While Exxon Mobil (XOM), Merck (MRK), and Verizon (VZ) also posted notable gains, shares of General Motors ended the day sharply lower. GM closed down 20.1 percent, ending the session at its worst closing level in over 70 years.

Bank of America (BAC), General Electric (GE), and Citigroup (C) also remained stuck firmly in negative territory, limiting the upside for the Dow.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region turned in a mixed performance on Tuesday. While Hong Kong's Hang Seng Index edged up 0.4 percent, Japan's benchmark Nikkei 225 Index fell 1.6 percent.

Meanwhile, the major European markets all ended the day in the red after seeing some choppy trading. While the U.K.'s FTSE 100 Index fell 0.2 percent, the French CAC 40 Index and the German DAX Index closed down 0.5 percent and 0.3 percent, respectively.

In the bond market, treasuries ended the day modestly higher after seeing some weakness earlier in the session. Subsequently, the yield on the benchmark ten-year note ended the session down less than a basis point at 3.175 percent.

Looking Ahead

Economic data is likely to be in focus on Wednesday, with the Commerce Department scheduled to release its report on retail sales in the month of April. Economists expect sales to come in unchanged after falling by 1.2 percent in March.

Traders are also likely to keep an eye on monthly reports on import and export prices and business inventories as well as the weekly crude oil inventories report.

Additionally, Applied Materials (AMAT) and BMC Software (BMC) are among the companies due to release their quarterly results after the close of trading today, while Macy's (M) is among those due to report their results on Wednesday.

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