Stocks are seeing notable weakness in mid-morning trading on Tuesday, pulling back further off their recent highs. Profit taking continues to contribute to the weakness in the markets, with traders cashing in on the market's recent gains ahead of the unofficial start of earnings season.
Some selling pressure has been generated by a report from the Times of London, which said that new forecasts from the International Monetary Fund are expected to suggest that toxic debts racked up by banks and insurers could spiral to $4 trillion.
In January, the IMF said that it expected the deterioration in U.S.-originated assets to reach $2.2 trillion by the end of next year.
In corporate news, Motorola revealed that it expects to incur about $110 million in first quarter charges related to a previously announced reduction of 2,800 jobs. In a regulatory filing, the company disclosed that it expects to incur the charges for the first quarter.
Motorola's cost-reduction measures also include other exit-related activities, including the termination of contractual commitments and asset impairments, resulting in additional pre-tax charges of about $13 million in the first quarter of 2009.
In other news, Xerox (XRX) announced that it would manage Procter & Gamble's (PG) worldwide print operations, helping the consumer products giant reduce operational costs by an estimated 20 to 25 percent. Despite the news, both stocks are down.
Additionally, Alcoa (AA) is scheduled to release its first quarter results after the close of trading, with the release of results from the aluminum producer seen as the unofficial start of the earnings reporting season.
Alcoa has said its first-quarter results would continue to be negatively affected by the troubled global economic environment that has adversely affected pricing and demand for aluminum, alumina, and aluminum products.
The major averages have moved well off their worst levels of the day in recent trading, although they currently remain firmly in the red. The Dow is currently down 130.54 at 7,845.31, the Nasdaq is down 22.18 at 1,584.53 and the S&P 500 is down 12.12 at 823.36.
Housing stocks are turning in some of the market's worst performances on the day, driving the Philadelphia Housing Index down 3.7 percent. With the loss, the index is pulling back further off the two-month closing high it set last Friday.
Within the sector, Temple-Inland (TIN) is helping to lead the way lower, falling 7.3 percent on the day. Shares of Temple-Inland are pulling back further off last Thursday's two-month closing high.
Transportation, real estate, and wireless are also posting substantial losses on the day. The Dow Jones Transportation Average is down 2.8 percent, while the Morgan Stanley REIT Index and the Amex Wireless Index are down 2.7 percent and 2.5 percent, respectively.
While most of the other major sectors are also moving lower, several sectors are bucking the downtrend by the broader markets. Gold, health insurance, and healthcare provider stocks are posting notable gains.
Stocks Driven By Analyst Comments
Nokia (NOK) is suffering a loss of 4.8 percent after being downgraded at WestLB. With the decline, the stock is pulling back off the nearly two-month closing high it set in the previous session.
The stock was downgraded to Sell from Neutral, as analysts see little hope that a recovery will stabilize earnings.
Additionally, Archer-Daniels-Midland (ADM) is down 8.6 percent after being downgraded to Sell from Hold at Citigroup. Analysts cited deteriorating trends for the downgrade, saying they will likely become evident at the upcoming earnings report.
Meanwhile, Rackspace (RAX) is up 7.4 percent after it was upgraded to Buy from Neutral at Goldman Sachs based on an improving growth profile and likely margin expansion. Analysts said that the company has executed well in a tough environment and is likely to post revenue growth of about 26 percent through 2012.
In overseas trading, stock markets across the Asia-Pacific region closed mostly lower on Tuesday, although selling pressure was generally subdued. Japan's benchmark Nikkei 225 Index ended the session down 0.3 percent.
Meanwhile, the major European markets are continuing to suffer weakness, adding to the losses posted on Monday. The U.K.'s FTSE 100 Index is down 1.5 percent, while the French CAC 40 Index and the German DAX Index are falling 0.9 percent and 1 percent, respectively.
In the bond market, treasuries are seeing considerable strength on the day, holding near their intraday highs. Subsequently, the yield on the benchmark 10-year note is down 4.8 basis points at 2.891 percent.
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