RTTNews - Stocks are continuing to linger in negative territory in mid-afternoon trading on Wednesday following the release of disappointing data on the service sector and the labor market. The major averages are all stuck in the red, although they have moved off their worst levels of the day.

The weakness in equities comes after the Institute for Supply Management's report on activity in the service sector in the month of July showed that the pace of contraction in the sector unexpectedly accelerated from the previous month.

Also disappointing traders was a report released by payroll processor Automatic Data Processing (ADP), which showed that private sector employment saw another notable decline in the month of July, although the pace of job losses slowed to its slowest rate since October of 2008.

On the earnings front, traders reacted to a mixed bag of earnings, with Procter & Gamble (PG), Kraft Foods (KFT), Ralph Lauren (RL) and Electronic Arts (ERTS) largely beating bottom line estimates while falling short on the revenue front.

The markets are also looking ahead to results from Allstate (ALL), Sunoco (SUN) and XTO Energy (XTO), among others, which are set to report after the closing bell.

The major averages have regained some ground in the past few minutes, but they currently remain stuck below the unchanged line. The Dow is currently down 36.27 at 9,283.92, the Nasdaq is down 18.87 at 1,992.44 and the S&P 500 is down 3.42 at 1,002.23.

Dow Components

A majority of the Dow components are in the red, contributing to the moderate loss being shown by the blue chip index in mid-afternoon trading.

Shares of Procter & Gamble are retreating by a notable margin, posting a loss of 2.8 percent after the firm's fourth quarter revenues fell well short of analyst estimates. The retreat has dragged the stock further off the roughly six-month closing high set late last week.

Further, communications giants AT&T (T) and Verizon (VZ) are falling by 2 percent and 1.9 percent, respectively. AT& is backing away from a nearly three-month closing high set last Thursday, while Verizon is continuing to slide away from a roughly four-month high set last week.

Caterpillar (CAT), Disney (DIS), Cisco (CSCO) and Intel (INTC) are also pulling back off their recent highs, while some financial stocks are limiting the losses in the Dow. Notably, Bank of America (BAC) is up by 6.2 percent reaching an eight-month intraday high, while JP Morgan Chase (JPM) has climbed by 3.9 percent, reaching a nine-month high.

Sector News

Health insurance stocks are continuing their disappointing performance, as reflected by the 2.8 percent loss being shown by the Morgan Stanley Healthcare Provider Index. The loss is dragging the index further away from the ten-month closing high it set last Thursday.

Tobacco, oil service and trucking stocks are also retreating by notable margins, while considerable weakness is also visible among biotechnology stocks. The NYSE Arca Biotechnology Index is down by 1.5 percent, pulling away from the historic high set in the previous session.

While some technology, telecommunications and pharmaceutical stocks are also moving lower by substantial margins, airline stocks continue to buck the day's downtrend. Notably, the NYSE Arca Airline Index is climbing by 3.9 percent, poised to close at its best level in well over six months.

Banking and commercial real estate stocks are also advancing along with some housing stocks, which are climbing by much more modest margins.

In Focus: Economic Data, Earnings News

As mentioned above, the ISM said its index of activity in the service sector edged down to 46.4 in July from 47.0 in June, with a reading below 50 indicating a contraction in the sector. The decrease came as a surprise to economists, who had expected the index to rise to 48.0.

Meanwhile, the U.S. Commerce Department revealed that factory orders rose 0.4 percent in June, surprising economists, who had expected the measure to drop 0.8 percent. May's factory orders figure was revised slightly lower to show an increase of 1.1 percent compared to the 1.2 percent increase that was originally reported.

With regard to the labor market, ADP said non-farm private employment fell by 371,000 jobs in July following a revised decrease of 463,000 jobs in June. Economists had been expecting a decrease of about 350,000 jobs compared to the loss of 473,000 jobs originally reported for the previous month.

On the earnings front, Procter & Gamble reported fourth quarter net income of $0.80 per share, compared to $0.92 per share in the same quarter of last year. Wall Street analysts expected the company to report earnings of $0.79 per share for the quarter. Meanwhile, net sales came in at $18.66 billion for the quarter, falling short of the $19.32 billion forecast by analysts.

Kraft Foods said its second quarter net income was $0.56 per share, compared to $0.49 per share in the year ago quarter, which edged out analyst estimates of $0.54 per share.
Revenues declined 5.9 percent to $10.2 billion, failing to meet estimates of $10.37 billion.

Devon Energy Corp. (DVN) reported adjusted second quarter earnings of $0.85 per share, crushing analyst estimates of $0.59 per share. Revenues for the quarter declined to $2.09 billion from $3.55 billion in the year-ago quarter but still surpassed forecasts of $1.92 billion.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region finished Wednesday's trading markedly lower. Hong Kong's Hang Seng Index posted a loss 1.5 percent, while Japan's benchmark Nikkei 225 Index ended the session down by 1.2 percent.

The major European markets also closed lower, with the French CAC 40 Index and the U.K.'s FTSE 100 Index both posting losses of 0.5 percent, while the German DAX Index fell by 1.2 percent.

In the bond markets, treasuries are revisiting negative territory. Subsequently, the yield on the benchmark ten-year note is trading at 3.718 percent, posting a gain of 3.9 basis points on the day.

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