After turning in a strong performance last week, stocks moved mostly lower during trading on Monday. The major averages all closed firmly in negative territory, although the tech-heavy Nasdaq posted a relatively modest loss.
The weakness in the markets was largely due to profit taking, with traders cashing in on the market's recent gains amid a lack of economic data and limited corporate news.
Uncertainty about the outlook for the markets inspired some of the profit taking, with some traders questioning whether stocks can extend their recent upward move amid expectations of a lack of significant catalysts in the near future.
Nonetheless, there are some key economic reports due to be released later in the week, including reports on retail sales, industrial production, and producer and consumer price inflation. Traders are also likely to keep a close eye on the weekly jobless claims report.
Banking stocks helped to lead the way lower after U.S. Bancorp (USB), BB&T (BBT), and Capital One (COF) all revealed plans to sell common stock in order to raise proceeds to repay funds received under the government's financial bailout program.
Some negative sentiment was also generated by news that billionaire investor Warren Buffett's Berkshire Hathaway (BRK-A) reported a first quarter net loss of $1.53 billion compared to a year-ago profit of $940 million.
Berkshire Hathaway's results were hurt by a drop in revenues as well as huge investment and derivative losses primarily on write-downs on investments in ConocoPhillips (COP).
In other news, President Barack Obama spoke earlier in the day, saying that a meeting with leading health care groups resulted in a pledge to reduce health care costs by $2 trillion over the next decade.
The president said that the groups have voluntarily come together to make an unprecedented commitment to cut the rate of growth of national health care spending by 1.5 percentage points each year over the next ten years.
Obama also urged Congress to work to reform health care by the end of the year, stressing that reform went beyond reducing costs.
While the major averages all finished the day in the red, the Nasdaq closed down only 7.76 points or 0.5 percent at 1,731.24. Meanwhile, the Dow fell 155.88 points or 1.8 percent to 8,418.77 and the S&P 500 closed down 19.99 points or 2.2 percent at 909.24.
As mentioned above, banking stocks turned in some of the market's worst performances after moving sharply higher last week. The Kbw Bank Index fell 7.1 percent after ending Friday's trading at a four-month closing high.
Capital One helped to lead the sector lower after announcing the public offering of 56 million shares of its common stock. Shares of Capital One closed down 13.5 percent after setting a four-month closing high on Friday.
Significant weakness was also visible among oil service stocks, as reflected by the 4.1 percent loss posted by the Philadelphia Oil Service Index. The loss by the index came after it ended the previous session at a seven-month closing high.
A pullback by the price of oil contributed to the weakness in the oil service sector, although crude for June delivery closed down only $0.13 at $58.50 a barrel after hitting a low of $56.78 a barrel earlier in the session.
Brokerage stocks also saw considerable weakness, dragging the Amex Securities Broker/Dealer Index down 4.7 percent. Most of the other major sectors also showed notable declines, with real estate, health insurance, and transportation stocks posting steep losses.
On the other hand, some software and biotechnology stocks bucked the downtrend by the broader markets, helping to limit the downside for the tech-heavy Nasdaq.
A vast majority of the Dow components finished the day in negative territory, contributing to the triple-digit loss posted by the blue chip index. Of the thirty Dow components, only five ended the session above the unchanged line.
General Motors (GM) turned in one of the Dow's worst performances, with the auto giant closing down 10.6 percent after its CEO said it is more probable that the company will need to file for bankruptcy. With the loss, GM set a new multi-decade closing low.
Shares of American Express (AXP) also saw considerable weakness after showing a strong upward move in recent weeks. American Express closed down 8.3 percent, pulling back well off the six-month closing high it set last Friday.
Reflecting the weakness in the banking sector, Bank of America (BAC), JP Morgan (JPM), and Citigroup (C) also showed considerable declines on the day.
While Alcoa (AA), Chevron (CVX), and Caterpillar (CAT) also posted significant losses, IBM (IBM), Wal-Mart (WMT), and Hewlett-Packard (HPQ) posted notable gains.
In overseas trading, stock markets across the Asia-Pacific region closed mostly lower on Monday, as traders cashed in on the recent strength in the markets. However, Japan's benchmark Nikkei 225 Index bucked the downtrend, edging up 0.2 percent.
The major European markets also pulled back off their recent highs, with the U.K.'s FTSE 100 Index closing down 0.6 percent, while the French CAC 40 Index and the German DAX Index fell 1.9 percent and 1 percent, respectively.
In the bond market, treasuries saw considerable strength, benefiting from the weakness in the stock markets. Subsequently, the yield on the benchmark ten-year note closed down 11.3 basis points at 3.18 percent.
While the economic calendar remains relatively light on Tuesday, trading could be impacted by the release of the Commerce Department's report on the U.S. trade deficit in the month of March. The deficit is expected to widen to $29.0 billion from $26.0 billion in February.
Additionally, engineering and construction company Fluor Corp. (FLR) is among the companies due to release their quarterly results after the close of trading today, while bond insurer MBIA Inc. (MBI) is among those due to report their results before the start of trading on Tuesday.
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