RTTNews - Following a notable rally in the previous session, stocks saw a considerable pullback during Wednesday's trading. The major averages showed lack of conviction during the first half of the day before moving firmly into negative territory in the afternoon.

Equities struggled to find direction in morning trading following a mixed report from the housing market. While a National Association of Realtors report showed a bigger than expected increase in existing home sales, the report also showed a considerable increase in housing inventories.

Nonetheless, stocks came under selling pressure following the Treasury Department's auction of $35.0 billion worth of 5-year notes. The sale drew a high-yield of 2.310 percent while attracting moderately strong demand, with the bid-to-cover ratio coming in at 2.32.

The report from the National Association of Realtors said that existing home sales rose 2.9 percent to an annual rate of 4.68 million units in April from a downwardly revised rate of 4.55 million units in March.

Economists had expected sales to rise to a 4.66 million unit rate from the 4.57 million unit rate originally reported for the previous month.

While the pace of existing home sales increased compared to the previous month, total housing inventories at the end of April represented a 10.2-month supply compared with a 9.6-month supply in March.

In corporate news, Bank of America (BAC) said that it raised almost $26 billion in its capital plan since the stress test results were announced and is well on its way to reaching the $33.9 billion indicated Supervisory Capital Assessment Program or SCAP buffer set by the Federal Reserve.

The company announced last week that it raised $13.5 billion through issuing 1.25 billion shares in an at-the-market common stock offering. It has also sold part of its holdings in China Construction Bank, generating a capital gain.

In other news, the Federal Reserve continued its treasury buyback program this morning, the second quantitative easing move of the week.

The New York Federal Reserve purchased $6.0 billion worth of securities with maturity dates ranging from May of 2012 to August of 2013. The day's buyback saw a total of $18.82 billion in treasuries submitted for the purchase.

This week, the Fed purchased $7.55 billion in treasuries bringing the total to $130.53 billion since the program began on March 25th.

The major averages all closed firmly in the red, just off their worst levels of the day. The Dow closed down 173.47 points or 2.1 percent at 8,300.02, the Nasdaq closed down 19.35 points or 1.1 percent at 1,731.08 and the S&P 500 closed down 17.27 points or 1.9 percent at 893.06.

Sector News

Most of the major sectors moved lower over the course of the trading day, helping the major averages to offset the majority of gains posted in the previous session.

Airline stocks turned in some of the day's worst performances, with the Amex Airline Index falling by 4.9 percent. With the decline, the index fell to a seven-week closing low.

The weakness in the oil-sensitive airline sector came amid a notable increase by the price of crude oil, which rose above $63 per barrel.

Banking stocks also showed notable weakness, as reflected by the 3.8 percent decline shown by the Kbw Bank Sector Index. The day's losses caused the index to return most of the gain it posted in the previous session.

Commercial real estate stocks also posted steep losses, dragging the Morgan Stanley Real Estate Index down 4.1 percent on the day. With the retreat, the index pulled back from the 2-week closing high set in the previous session.

While railroad, housing, and brokerage stocks were also under pressure, semiconductor stocks held onto strong gains. The Philadelphia Semiconductor Index closed up 1.6 percent, rising to its best closing level in three weeks.

Dow Components

Most of the Dow components finished on the downside, contributing to the triple digit pullback by the blue chip index.

General Motors (GM) turned in one of Dow's worst performances, with the auto giant closing down 20.1 percent, as the bankruptcy of the American icon seems inevitable. Shares of GM have moved well off their recent highs, pulling back to test their multi-decade lows.

JP Morgan Chase (JPM) and American Express (AXP) also posted steep losses closing down 5.2 percent and 4.4 percent, respectively. With the retreat, the Dow components gave back most of their recent gains.

Procter & Gamble (PG), 3M (MMM), and General Electric (GE) were among the other Dow components that posted notable losses.

Meanwhile, Merck (MRK) and Caterpillar (CAT) were the only Dow components that ended the session higher, posting modest gains on the day.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region finished notably higher on Wednesday. Japan's benchmark Nikkei 225 Index rose 1.4 percent, while Hong Kong's Hang Seng Index jumped by 5.3 percent.

The major European markets posted more modest gains, with the U.K.'s FTSE 100 Index finishing up by 0.1 percent, while the French CAC 40 Index and the German DAX closed up 0.8 percent and 0.3 percent, respectively.

In the bond markets, treasuries plummeted on the day. Subsequently, the yield on the benchmark ten-year note closed up 20.2 basis points at a six-month high of 3.695 percent.

Looking Ahead

Thursday's trading is likely to be impacted by a series of economic reports, including reports on weekly jobless claims and new home sales. Oil may also be in focus as OPEC holds a meeting on its output and the Energy Information Administration releases its weekly oil inventories report.

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