Stocks are seeing notable weakness in mid-morning trading on Tuesday, with the major averages giving back some ground after posting standout gains in the previous session. The weakness in the markets is largely due to profit taking following Monday's rally.
While stocks are moving mostly lower, selling pressure has remained somewhat subdued as traders keep an eye on comments by Federal Reserve Chairman Ben Bernanke and Treasury Secretary Tim Geithner's before the House Financial Services Committee.
In prepared remarks, Bernanke drove home the point that while the bonuses AIG (AIG) has given to employees were inappropriate, the overall bailout of the world's largest insurer was necessary to prevent a 1930s style meltdown.
Additionally, Geithner made it known that the AIG Financial Products division was unregulated, operating in unregulated ways and that all institutions that pose systemic risk to the broader economy must be subject to oversight.
In response to the recent uproar surrounding the bonuses for AIG employees, 15 of the retention bonus recipients from the beleaguered AIG's Financial Products unit have agreed to return the more than $30 million worth of payments in full.
In related news, the massive AIG backlash has driven other banks to work to return government funds as soon as possible.
According to the Wall Street Journal, Goldman Sachs (GS) may sell its stake in the Industrial and Commercial Bank of China to help it repay $10 billion of what it received under the TARP. The New York Times reported that the repayment could come within a month.
In other news, Chicago Federal Reserve Bank President Charles Evans said at a conference hosted by the Czech National Bank in Prague that he expects the Fed's actions to help stabilize the financial markets, which is an essential part of an economic recovery.
The Federal Open Market Committee's policy decisions have been calibrated to deal with the 'adverse feedback loop' between disruptions to financial market stability and the real economy, Evans said in prepared remarks.
They will also have a stabilizing effect on markets around the world and will therefore eventually stimulate worldwide economic recovery, he added.
The major averages have moved to the downside in recent trading, with the tech-heavy Nasdaq pulling back to a new low for the session. The Dow is currently down 100.75 at 7,675.10, the Nasdaq is down 27.08 at 1,528.69 and the S&P 500 is down 11.99 at 810.93.
While the losses by the broader markets have been relatively limited, most of the major sectors are continuing to show notable declines. Some of the worst performances of the day are coming out of the gold sector.
The Amex Gold Bugs Index is down 4 percent on the day, dropping from the nearly six-month high it hit in the previous session. The decline is partially due to some weakness in the price of the precious metal, which is down $32.30 at $920.20 an ounce.
Other resource stocks, like oil services and natural gas stocks, are also suffering considerable weakness on the day, with the Philadelphia Oil Services Index down 3.9 percent and the Amex Natural Gas Index down 4 percent.
After helping to lead the way higher on Monday, banking and real estate stocks are also posting notable losses on the day, with the Dow Jones Banks Index and the Morgan Stanley REIT Index down 2.8 percent and 3.2 percent, respectively.
Most of the other major sector indices are also moving lower, pulling back off the highs reached in the previous session.
Stocks Driven By Analyst Comments
Under Armour (UA) is suffering a loss of 11.4 percent on the day after the stock was downgraded to Underweight at Morgan Stanley. With the decline, the stock has fallen from the nearly two-month high it set in the previous session.
Analysts at Morgan Stanley said that the downgrade was based on the company's weak running shoe launch and an increasing markdown risk, raising risk to consensus estimates. Further fear comes as the stock is up 52 percent from its March 6 low.
Additionally, Disney (DIS) is posting a loss of 3 percent after being downgraded to Neutral from Buy at Goldman Sachs. Analysts explained that while the company is well positioned in the long-term, trades are at a 25 percent premium to peers despite a tough near-term outlook. Analysts also noted that second-quarter results could disappoint.
Meanwhile, U-Store-It (YSI) is posting a 9.7 percent gain on the day after being upgraded to Outperform from Neutral at Robert W. Baird.
In overseas trading, stock markets across the Asia-Pacific region closed considerably higher on Tuesday, benefiting from the rally seen on Wall Street overnight. Japan's benchmark Nikkei 225 Index extended a recent upward move with a 3.3 percent gain.
Meanwhile, the major European markets have moved to the downside after seeing early strength. While the U.K.'s FTSE 100 Index and the French CAC 40 Index are down 1.5 percent and 0.8 percent, respectively, the German DAX Index is clinging to a modest gain.
In the bond market, treasuries are showing some weakness on the day, although they have come off their lows. Subsequently, the yield on the benchmark 10-year note is up 3.9 basis points at 2.699 percent.
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