RTTNews - After experiencing a strong start on the heels of largely encouraging economic data, stocks turned lower over the course of the trading day on Thursday. The major averages pulled back firmly into negative territory, adding to the steep losses posted in the previous session.

The early strength came after the Commerce Department released a report showing that housing starts rose 17.2 percent to an annual rate of 532,000 units in May from the revised April estimate of 454,000. Economists had expected starts to rise to 485,000 from the 458,000 originally reported for the previous month.

While single-family starts showed a notable 7.5 percent increase in May, the jump in housing starts was due in large part to a 77.1 percent increase in buildings with five units or more.

Separately, the Labor Department revealed that producer prices rose 0.2 percent in May. This followed a 0.3 percent increase for April and came in below economist estimates of a 0.6 percent increase.

Core producer prices, which leave out the impact of volatile food and energy prices, edged down by 0.1 percent for May. In April, the figure was up by 0.1 percent.

Meanwhile, the Federal Reserve revealed that industrial production fell by 1.1 percent in May following a revised 0.7 percent decrease in April. Economists had been expecting production to fall 1.0 percent compared to the 0.5 percent drop originally reported for the previous month.

The report also showed that capacity utilization fell to 68.3 percent in May from a revised 69.0 percent in the previous month. The capacity utilization rate had been expected to slip to 68.4 percent from the 69.1 percent originally reported for April.

In other news, the Federal Reserve continued its treasury buyback program Tuesday, completing its first quantitative easing move of the week. The New York Federal Reserve purchased $6.45 billion worth of securities with maturity dates ranging from May of 2012 to November of 2013.

The day's buyback saw a total of $31.32 billion in treasuries submitted for the purchase. Overall, the Fed has purchased a total of $162.97 billion since the program began on March 25th.

After the close of trading on Wall Street, Adobe Systems (ADBE) reported adjusted second quarter net income of $185.0 million or $0.35 per share compared to $272.7 million or $0.50 per share in the year-ago quarter. Analysts had expected the firm to earn $0.35 per share.

The major averages ended the session notably lower, just off their worst levels of the day. The Dow closed down by 107.46 points or 1.3 percent at 8,504.67, the Nasdaq closed down by 20.20 points or 1.1 percent at 1,796.18 and the S&P 500 closed down by 11.75 points or 1.3 percent at 911.97.

Sector News

Most of the major sectors moved lower over the course of the trading session, prompting the weakness seen in the major averages on the day.

Considerable weakness emerged among tobacco stocks in afternoon trading, with the NYSE Arca Tobacco Index closing down 4.8 percent. The day's retreat drove the index to its worst closing level in just under six weeks.

Retail and oil service stocks also pulled back sharply on the day, with the S&P Retail Index and the Philadelphia Oil Service Sector Index both dropping by 3.1 percent. The decline drove the indices to their worst closing levels in almost three weeks.

Best Buy (BBY) helped to lead the retail sector, with the consumer electronics giant closing down 7.3 percent. The loss by Best Buy came after the company reported better the expected first quarter earnings but reaffirmed its earlier full year guidance.

Chemical, brokerage, and semiconductor stocks also moved notably lower, pulling back further off their recent highs.

On the other hand, the healthcare and gold stocks finished the day on the upside, with the Morgan Stanley Healthcare Payor Index and the NYSE Arca Gold Bugs Index closing the day up by about 2 and 1 percent, respectively.

Dow Components

A majority of the Dow components ended the day lower, dragging the blue chip index down by triple digits.

Shares of Procter & Gamble (PG) showed a notable decline, dropping by 2.4 percent. The day's fall pushed the stock down to its worst closing level since early May.

Bank of America (BAC) also posted one of the day's steepest losses in the Dow, with the financial services giant closing down by 4.5 percent on the day. The day's pullback took the stock further away from the one-month closing high it set last Friday.

Weakness was also visible in shares of Disney (DIS) and Alcoa (AA), which fell by 3.1 percent and 2.8 percent, respectively for the day. General Electric (GE) and Home Depot (HD) also posted notable losses.

Despite the retreat by most of the Dow components, shares of Microsoft (MSFT) and Pfizer (PFE) were able to hold onto some of their gains, finishing just above the unchanged line as the Dow's only gainers on the day.

Other Markets

In overseas trading, stock markets across the Asia Pacific region ended Tuesday's trading notably lower. Japan's benchmark Nikkei 225 Index closed down by 2.9 percent and Hong Kong's Hang Seng finished down by 1.8 percent.

Meanwhile, the major European markets turned in a mixed performance. While the German DAX Index and the U.K.'s FTSE 100 Index both finished just above the unchanged line, the French CAC 40 fell by 0.2 percent on the day.

In the bond markets, treasuries closed the day higher, buoyed by the Fed's quantitative move late this morning. Subsequently, the yield on the benchmark ten-year note finished at 3.674 percent, a drop of 3.9 basis points on the day.

Looking Ahead

Wednesday's trading is likely to be impacted by consumer price data for the month of May. The headline figure is expected to move up by 0.3 percent after showing no change in April.

Excluding volatile food and energy prices, the core figure is expected to edge up by 0.1 percent after climbing 0.3 percent in the previous month. The report is scheduled to be released at 8:30 a.m. ET.

Traders are also likely to look to comments by Federal Reserve Chairman Ben Bernanke and FDIC Chair Sheila Bair at a financial literacy summit in Washington. The remarks are set to begin at 9:00 a.m. ET.

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