RTTNews - Stocks saw substantial weakness on Tuesday, as traders largely saw the day's positive economic news as already priced into the market. The major averages all moved sharply lower, adding to the losses posted in the previous session.
This morning, the Institute for Supply Management released a report showing that its manufacturing index jumped to 52.9 in August from 48.9 in July, with a reading above 50 indicating an expansion in the sector.
With the increase, the index rose to its highest level since June of 2007. On average, economists had been expecting a more modest increase by the index to a reading of 50.2, which would have still indicated modest growth in the sector.
Separately, pending home sales increased by much more than expected in the month of July, according to a report released by the National Association of Realtors.
The report showed that the pending home sales index rose 3.2 percent to 97.6 in July from a reading of 94.6 in June. The increase, which exceeded economist estimates of 1.5 percent growth, lifted the index to its highest level since June of 2007.
Meanwhile, the Commerce Department released a report showing that construction spending fell 0.2 percent in July following a downwardly revised 0.1 percent increase in June. Economists had expected spending to fall 0.2 percent compared to the 0.3 percent increase originally reported for the previous month.
In corporate news, online auction giant eBay (EBAY) announced that it has signed an agreement to sell its Skype communications unit for about $1.9 billion in cash and a $125 million note.
The major averages ended the session firmly in negative territory, just off their worst levels of the day. The Dow fell by 185.68 points or 2 percent to 9,310.60, the Nasdaq declined by 40.17 points or 2 percent to 1,968.89 and the S&P500 fell by 22.58 points or 2.2 percent to close at 998.04.
Financial stocks posted some of the day's steepest losses, with the Kbw Bank Index and the NYSE Arca Securities Broker/Dealer Index falling by 5.8 percent and 5.4 percent, respectively.
The pullback dragged the bank index off of last week's eight and a half month closing high, while the brokerage index moved off Monday's eleven-month closing high.
Commercial real estate and airline stocks also saw disappointing outings. The Morgan Stanley REIT Index slid by 5.3 percent, while NYSE Arca Airline Index posted a 5 percent loss, moving further away from the seven-month closing high it set late last month.
Housing stocks also saw notable weakness on the day, dragging the Philadelphia Housing Sector Index down 3.7 percent on the session. The day's decline pushed the index further away from the eleven-month closing high set late last week.
Standard Pacific Corp. (SPF) helped to lead the sector lower, falling by 9.1 percent and moving further off its recent highs.
Healthcare provider, electronic storage, networking, steel and biotechnology stocks also posted significant losses, reflecting the day's broad based weakness.
The Dow was largely led lower by its financial components, with Bank of America (BAC) posting a 4.7 percent loss on the session. The stock backed further off of the ten-month closing high set last Friday.
Shares of financial giants American Express (AXP) and JP Morgan Chase (JPM) also helped to drag the blue chip index lower, falling by 5.4 percent and 4.1 percent, respectively. American Express pulled back further off last week's ten-month closing high, while JP Morgan set a two-week closing low.
Notable losses were also shown by General Electric (GE) and Alcoa (AA), which closed down by 4 percent and 3.8 percent, respectively. General Electric closed at a two-week low, while Alcoa closed at its worst level in a month.
Caterpillar (CAT), Intel (INTC), DuPont (DD) and 3M (MMM) also moved sharply lower on the day, while Wal-Mart (WMT) was the only Dow component to end the session higher, eking out a 0.2 percent gain.
In overseas trading, stock markets across the Asia-Pacific region closed mostly higher on Tuesday. Japan's benchmark Nikkei 225 Index closed up 0.4 percent, although it was well off its best levels of the day.
Meanwhile, the major European closed notably lower, with the French CAC 40 Index and the U.K.'s FTSE 100 sliding by 1.9 percent and 1.8 percent, respectively while the German DAX Index fell by 2.5 percent.
In the bond markets, treasuries closed modestly higher amid the pullback on Wall Street. Subsequently, the yield on the benchmark ten-year note finished at 3.375 percent, posting a loss of 2.6 basis points.
The ADP National Employment report, which tallies private sector employment, is scheduled to be released at 8:15 a.m. ET on Wednesday. The private sector is expected to have lost 246,000 jobs for August.
Further, the U.S. Labor Department is scheduled to release its final report on second quarter productivity and unit labor costs at 8:30 a.m. ET. Analysts expect a 6.1 percent increase in non-farm productivity.
Separately, the Commerce Department is due to release its report on factory goods orders for July at 10 a.m. ET to cap off a busy morning. Orders for manufactured goods are expected to have increased 1.5 percent for the month.
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