Stocks Finish Modestly Lower Following Another Lackluster Session - U.S. Commentary

  @ibtimes on July 29 2009 4:50 PM

RTTNews - Following an early move to the downside, stocks bounced around in negative territory through Wednesday's session in reaction to the day's slew of earnings and economic reports. The major averages all finished lower by modest margins, experiencing another lackluster session.

On the economic front, the Commerce Department released a report showing that orders for transportation equipment declined sharply in June, contributing to a substantial decline in orders for manufactured durable goods.

The report showed that durable goods orders fell 2.5 percent in June following a downwardly revised 1.3 percent increase in May. Economists had expected orders to fall 0.6 percent compared to the 1.8 percent increase originally reported for the previous month.

Excluding a 12.8 percent decrease in orders for transportation equipment, orders for durable goods actually rose 1.1 percent in June compared to a 0.8 percent increase in May. The increase surprised economists, who had expected ex-transportation orders to come in unchanged.

Equities saw some further downside after the Treasury Department said its $39.0 billion sale of five-year notes drew a high yield of 2.625 percent. Demand was much weaker than expected, with the bid-to-cover ratio coming in at 1.92 compared to the 2.58 posted in the previous auction.

The bid-to-cover ratio is a measure of demand that indicates the amount of bids for each dollar worth of securities being sold.

Meanwhile, the markets saw little reaction to the Federal Reserve's Beige Book report. While the report indicated that economic activity continued to be weak going into the summer, it noted that most of the twelve Fed districts indicated that the pace of decline has moderated or that activity has begun to stabilize.

In earnings news, traders looked to quarterly results from Time Warner (TWX), Qwest (Q) and ConocoPhillips (COP), which reported earnings that largely beat Wall Street estimates. However, revenues fell short of expectations, a typical trend that has emerged amid the current earnings season.

The major averages staged a recovery attempt in the final hour of trading, although they remained stuck in negative territory. The Dow fell by 26 points or 0.3 percent to 9,070.72, the Nasdaq slipped by 7.75 points or 0.4 percent to 1,967.76 and the S&P 500 declined by 4.47 points or 0.5 percent to 975.15.

Sector News

Resource stocks turned in some of the day's worst performances, with oil service, steel, natural gas and gold stocks all posting steep losses. The move came amid a second straight day of declines in commodity prices.

With the price of oil falling nearly 6 percent, the Philadelphia Oil Service Index fell by 3.3 percent, extending its move away from roughly a six-week high set last Friday.

Electronic storage and commercial real estate stocks also showed notable declines, with the NYSE Arca Disk Drive Index and the Morgan Stanley Real Estate Index falling by 1.4 percent and 1.3 percent, respectively.

The disk drive index backed off of its best closing level in nearly ten months, while the real estate index retreated from its best closing level in six weeks.

While internet and housing also lost ground, healthcare provider, airline brokerage and biotechnology stocks were able to move higher, bucking the day's downtrend.

Notably, the Morgan Stanley Healthcare Provider Index rose by 2 percent, while the NYSE Arca Airline Index posted a gain of 1.4 percent. Both finished at multi-month closing highs.

Dow Components

The Dow was pulled lower by shares of Caterpillar (CAT), which fell by 2.5 percent. The day's loss dragged the stock well off the more than six-month closing high it set on Tuesday.

Shares of Alcoa (AA) and General Electric (GE) also fell, posting losses of by 2.2 percent and 2.1 percent, respectively. Both stocks backed off of their best closing levels in roughly six weeks.

Chevron (CVX) also pulled back by a notable margin, recording a loss of 1.8 percent on the day. With the decline, the stock fell further away from the nearly six-week closing high set on Monday.

DuPont (DD) and Disney (DIS) also moved off of their recent highs, while shares of communications giants Verizon (VZ) and AT&T (T) bucked the day's downtrend. Verizon rose by 1.9 percent and AT&T gained 1.7 percent, with both setting comparable closing highs.

Further, gains by United Technologies (UTX), Microsoft (MSFT) and Bank of America (BAC) also helped to limit the loss by the Dow. Notably, Bank of America posted a gain of 1.4 percent, finishing at a six-week high.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region finished largely on the downside on Wednesday. Hong Kong's Hang Seng Index slid by 2.4 percent, although Japan's benchmark Nikkei 225 Index bucked the downtrend and closed up by 0.3 percent.

Meanwhile, the major European markets closed notably higher, with the German DAX Index and the French CAC 40 Index finishing up by 1.9 percent and 1 percent, respectively, while the U.K.'s FTSE 100 Index rose by 0.4 percent.

In the bond markets, treasuries turned in a mixed performance for the second straight session following the results of the five-year auction. While the five-year note finished in negative territory, the thirty-year note and the benchmark ten-year note closing high, driving the yield on the ten-year note down 2.4 basis points to 3.664 percent.

Looking Ahead

Traders will have a chance to react to more earnings news on Thursday, delving into results from Visa (V), Exxon Mobil (XOM), Master Card (MA), Travelers (TRV) Automatic Data Processing (ADP), Disney (DIS) and Cigna (CIG), among a slew of others.

Trader attention will also be keyed on weekly jobless claims figures from the Labor Department. Economists expect first time claims for the week ended July 25th to rise to 575,000 from 554,000 in the previous week. The report will be released at 8:30 a.m. ET.

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