RTTNews - Stock finished sharply lower on Tuesday, as traders did some profit taking on the day amid a lack of significant economic data to drive trading. The major averages all closed lower by considerable margins, with the sell off accelerating late in the session.
Cashing in on recent gains, traders braced for what is expected to be a dreary earnings reporting season, with aluminum producer Alcoa (AA) set to report after the close of trading on Wednesday.
Aside from the earnings data on tap for the second half of the week, traders are also looking ahead to a series of economic reports on employment, international trade and consumer sentiment, with expectations deflated following disheartening employment data last week.
Earlier today, the results of the Treasury's auction of $35 billion worth of three-year notes cooled investor anxiety in regards to rising interest rates amid the recessionary economic conditions.
The sale drew a high-yield of 1.519 percent and attracted moderately strong demand, with the bid-to-cover ratio coming in at 2.62. The bid-to-cover ratio is a measure of demand that indicates the amount of bids for each dollar worth of securities being sold.
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.
Traders will also look the Treasury's sale of $19 billion worth standard ten-year notes on Wednesday. The results of the standard ten-year auction and the sale of TIPS will be closely watched by investors, who will compare the yields to gauge the prospect of near-term inflation.
The government has continued to sell bonds in record amounts to fund its accelerated stimulus spending, while recent comments from the Obama administration have led to rampant speculation regarding a second stimulus package.
The major averages all finished lower, seeing further downside in late day trading. The Dow fell 161.27 points or 1.9 percent to 8,163.60, the Nasdaq closed down 41.23 points or 2.3 percent at 1,746.17, while the S&P 500 dropped by 17.69 or 2 percent at 881.03.
Housing stocks pulled back by notable margins, with the Philadelphia Housing Sector Index posting a loss of 4.4 percent on the day. The loss dragged the index down to its lowest closing level in well over three months.
Commercial real estate stocks also fell sharply, as reflected by the 4.3 percent loss posted by the Morgan Stanley REIT Index. One of the leading decliners in the sector was CBL & Associates (CBL), which slipped by 8.8 percent. The decline pulled the stock down to a two-month closing low.
Oil service, transportation, networking and chemical stocks also fell sharply for the session, with the pullback by oil service stocks precipitated by a decline in the price of oil, which fell for a fifth straight session. Oil for August delivery closed down $1.12 at $62.93 per barrel.
Meanwhile, healthcare provider and health insurance stocks saw strong gains on the day. The Morgan Stanley Healthcare Payor Index and the Morgan Stanley Healthcare Provider index closed up by 3.4 percent and 3 percent, respectively, partly offsetting recent losses.
The move came amid hints of less stringent reforms for the healthcare industry as lawmakers debate healthcare reform in Washington.
A majority of the Dow components finished in negative territory, contributing to the triple digit loss posted by the blue chip index.
Shares of DuPont (DD) saw the steepest declines in the Dow, dropping by 5.1 percent on the day. With the loss, the stock has now nearly offset all of the gains seen in late June.
Caterpillar (CAT) and General Electric (GE) fell by 4.5 percent and 4.1 percent, respectively, with the stocks being dragged down to their lowest closing prices in roughly three months.
Boeing (BA) also fell by a notable margin, slipping by 3.8 percent on the day. The stock extended its recent losses, closing at its worst level in over two months.
While American Express (AXP), 3M (MMM) and United Technologies (UTX) also fell, shares of Alcoa climbed by 1.6 percent, moving off of a one-month low set in the previous session.
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 rose by a notable margin following the day's respectable three-year note auction. Subsequently, the yield on the benchmark ten-year note closed at 3.46 percent, a drop of 4.6 basis points on the day.
With no significant economic reports on tap for Wednesday, traders will likely start to look to quarterly results, with Pepsi Bottling Group (PBG) and Family Dollar (FDO) set to report their results ahead of the open.
Meanwhile, Alcoa will report its second quarter results after the close of trading, with the aluminum producer expected to incur a loss of $0.37 per share on revenues of $3.94 billion. In the year-ago period, the company earned $0.66 per share on revenues of $7.62 billion.
Some traders may look to the Treasury's auction of ten-year notes amid concern over interest rates while also keeping an eye on the Energy Information Administration's oil inventory report.
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