RTTNews - Stocks are seeing continued weakness in early afternoon trading on Tuesday, as traders are cashing in on recent gains amid a lack of significant economic indicators on the day. The major averages are all in negative territory, continuing their streak of lackluster performance amid the low volume trading season.
Traders are doing some profit taking, positioning themselves for what is expected to be a dismal earnings season, set to be kicked off by Alcoa (AA) tomorrow.
Aside from the influx of earnings data on tap for the second half of the week, traders will also look to a series of reports on employment, international trade and consumer sentiment.
Shortly, traders will look to the Treasury Department's $35.0 billion auction of three-year notes amid interest rate concerns in the broader markets. The results of the auction are due to be announced at 1 p.m. ET.
Monday, an auction of 10-year Treasury Inflation Protect Securities, or TIPS, drew a yield of 1.92 percent and a bid-to-cover ratio of 2.51, its highest in nine years. The bid-to-cover ratio is a measure of demand that indicates the amount of bids for each dollar worth of securities being sold.
The government has continued to sell bonds in record amounts to fund its accelerated stimulus spending. Recently, Vice President Joe Biden confessed that the Obama administration misread the state of the economy, while other members of the administration have not ruled out the possibility of a second stimulus package.
The major indices have moved sideways in recent trading, lingering near their worst levels of the day. The Dow is currently down 92.12 at 8,232.75, the Nasdaq is sliding 23.25 to 1,764.15 and the S&P 500 is falling by 10.05 to 888.67.
Significant weakness remains visible among housing stocks, with the Philadelphia Housing Sector Index retreating by 2.8 percent. The fall dragged the index down to its worst intraday level in three months earlier in the session.
Energy stocks are also deepening their losses, with the Philadelphia Oil Service Index and the NYSE Arca Natural Gas Index down by 2.3 percent and 1.7 percent, respectively. In the oil service sector, shares of Transocean (RIG) are falling 3.6 percent to their worst intraday price in over two months.
The losses by energy stocks come as the price of oil continues to retreat on the NYMEX, with oil for August delivery now down $1.40 at $62.65 a barrel. With the loss, the price of oil is moving lower for the fifth consecutive session, falling to a six-week intraday low.
While selling pressure has also turned up in the railroad, commercial real estate, telecommunications and electronic storage sectors, strong gains have continued among healthcare provider and health insurance stocks.
The Morgan Stanley Healthcare Payor Index and the Morgan Stanley Healthcare Provider index are up by 4.6 percent and 3.4 percent, respectively, partly offsetting recent losses. The move comes amid hints of less stringent reforms for the industry as lawmakers debate healthcare reform in Washington.
Stocks In The News
Hansen Medical (HNSN) is sliding after the company announced its preliminary revenue forecast for the second-quarter. The company expects revenues to be in the range of $3.1 million to $3.3 million, while Wall Street analysts expected the firm to report revenues of $8.77 million. The stock is down by 34 percent, sliding to its worst intraday price in well over three months.
Discover Financial Services (DFS) is also on the decline after the firm said it commenced a public offering of $500 million of common stock. Shares of the company are down by 11.3 percent amid concern over share dilution, offsetting the majority of its recent gains.
Meanwhile, circuit protection products maker Littelfuse (LFUS) is up after announcing that sales for the second quarter are now expected to be about $101 million, which represents a 20 percent sequential increase. Previous guidance called for a 10-15 percent sequential increase. The stock is up by 13 percent, soaring to its best intraday level in well over eight months.
In Focus: Earnings
As mentioned above, Alcoa will report its second quarter results after the close of trading on Wednesday, with the aluminum producer expected to incur a loss of $0.34 per share on revenues of $3.94 billion. In the prior year period, the company posted earnings of $0.66 per share on revenues of $7.62 billion.
In today's earnings news, Greenbrier (GBX) reported an third-quarter loss of $50.53 million or $3.00 per share versus a profit of $8.1 million or $0.49 per share in the previous year. Excluding charges, the company earned $0.03 per share. The firm also said revenue dropped by 36 percent.
In overseas trading, stock markets across the Asia-Pacific region ended Tuesday's session mixed. Japan's benchmark Nikkei 225 Index closed down by 0.3 percent, while South Korea's KOSPI rose 0.4 percent on the day.
Meanwhile, the major European markets all closed in negative territory. The German DAX Index and French CAC 40 Index fell by 1.2 percent and 1.1 percent, respectively, while the U.K.'s FTSE 100 dipped 0.2 percent.
In the bond markets, treasuries have moved into positive territory amid the pullback on Wall Street. Subsequently, the yield on the benchmark ten-year note is trading at 3.495 percent, a drop of 1.1 basis points on the day.
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