RTTNews - Stocks continue to post sharp losses in mid-afternoon trading on Monday, as last week's troubling retail sales and consumer sentiment reports deflated trader optimism regarding a near-term economic recovery. The major averages are all in negative territory by notable margins, adding to the losses posted last week.

In an interview with RTT News, Peter Cardillo, chief market economist at Avalon Partners discussed today's retreat, stating that the real worry is the quality of the recovery, although he doesn't expect the selling to turn into a major correction.

I think this is basically just a minor pullback.something that will actually be healthy for the summer rally to continue, Cardillo said,

However, Cardillo added, Going forward.in the latter part of September.we could see a more meaningful correction.

Some selling pressure has been generated by news that Lowe's (LOW) reported second quarter earnings and revenues that fell short of estimates. The home improvement retailer also provided disappointing guidance.

Nonetheless, some of the pessimism was moderated by the release of a report from the Federal Reserve Bank of New York showing that conditions for New York manufacturers improved for the first time in well over a year in the month of August.

Stocks rose by a modest margin after the National Association of Home Builders released its report on homebuilder confidence in the month of August, showing that its homebuilder confidence index rose to its highest level in over a year.

The report showed that the NAHB/Wells Fargo Housing Market Index rose to 18 in August from 17 in July. With the increase, which came in line with economist estimates, the index rose to its highest level since June of 2008.

The major averages have moved sideways after seeing some upside following the day's housing data and remain stuck in the red. The Dow is currently down 157.19 at 9,164.21, the Nasdaq is down 48.74 at 1,936.78 and the S&P 500 is down 20.90 at 983.19.

Dow Components

A majority of the Dow components are posting losses in mid-afternoon trading on Monday, contributing to the triple digit pullback by the blue chip index.

Alcoa (AA) and General Electric (GE) are down by considerable margins, falling 6.2 percent and 3.6 percent, respectively. Alcoa is moving further away from a ten-month closing high set late last week, while General Electric is sliding further away from a seven-month closing high set earlier this month.

Shares of Home Depot (HD) are also moving lower, falling by 3.3 percent. With the decline, the stock is backing further off of an eleven-month closing high set on Thursday. The move comes after competitor Lowe's earnings results deflated prospects for the home improvement segment.

Caterpillar (CAT), DuPont (DD) and Bank of America (BAC) are also down by notable margins, while Pfizer (PFE) is bucking the day's downtrend. Shares of the drug manufacturer are up by 1 percent but remain stuck in a recent trading range. Coca-Cola (KO) is also on the rise, bouncing further off of a six week closing low, but it is posting a more modest gain.

Sector News

Notable weakness is visible among electronic storage stocks, as reflected by the 3.2 percent drop being shown by the NYSE Arca Disk Drive Index. With the slide, the index is pulling back further off of the ten and a half month high set last Thursday.

The index is being hurt by shares of Hutchinson Technology (HTCH), which are down by 5.4 percent. The stock has set a ten-day low after hovering near a nine-month high last week.

Real estate and banking stocks are also moving sharply lower, with the Morgan Stanley REIT Index and the S&P Banks Index down by 4.6 percent and 4.2 percent, respectively.

While the real estate index is pulling back off a nine-month closing high set earlier this month, the banking index is continuing its zigzag movement after reaching a seven-month closing high to close out the first week of August.

Resource stocks are also continuing their disappointing outing, with steel, gold and oil service stocks puling back by considerable margins. The retreat comes amid a drop in commodities prices on the NYMEX, where gold has plunged by $12.60 to $936.10 an ounce and crude oil is down $1.52 at $65.99 per barrel.

While networking, retail and transportation stocks are also moving sharply lower, healthcare related stocks are continuing to defy the day's downward move. The Morgan Stanley Healthcare Payor Index is up by 3.3 percent, while the Morgan Stanley Healthcare Provider Index is showing a much more modest gain of 0.7 percent.

The gains comes after President Obama and other administration officials made comments over the weekend suggesting that they are stepping back from the insistence that a public insurance option needs to be part of health care reform.

In Focus: Economic & Corporate News

As mentioned above, the New York Fed said its general business conditions index rose to 12.1 in August from a negative 0.6 in July, with a positive reading indicating an expansion in the manufacturing sector. Economists had been expecting the index to increase more modestly to 3.0.

Commenting on the data, Peter Boockvar, equity strategist for Miller Tabak, said, Net-net, the data is evidence that manufacturing will help lead the way to positive GDP in Q3.

On the earnings front, Lowe's reported second quarter net earnings of $0.51 per share compared to $0.63 per share in the same period last year. Wall Street expected the company to earn $0.54 per share for the quarter. The home improvement retailer also provided disappointing guidance.

In other news, online broker Charles Schwab (SCHW) is in focus after the company revealed that it would vigorously defend itself in court against allegations by New York Attorney General Andrew Cuomo regarding the company's sale of Auction Rate Securities, or ARS, to retail clients.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region finished considerably lower on Monday. Japan's benchmark Nikkei 225 Index slid by 3.1 percent, while Hong Kong's Hang Seng Index fell by 3.6 percent.

The major European markets also closed notably lower, with the French CAC 40 Index and the German DAX Index falling by 2 percent and 2.1 percent, respectively, while the U.K.'s FTSE 100 Index slipped by 1.5 percent.

In the bond markets, treasuries are holding onto strong gains amid the pullback on Wall Street. Subsequently the yield on the benchmark ten-year note is trading at 3.494 percent, posting a loss of 6.4 basis points on the day.

For comments and feedback: contact editorial@rttnews.com