RTTNews - Stocks are seeing substantial weakness in early afternoon trading on Tuesday, with the major averages lingering near their worst levels of the day. Traders are cashing in on recent strength in the markets despite some better than expected economic data.

The Institute for Supply Management released a report this morning showing that economic activity in the manufacturing sector expanded in the month of August, the first time in eighteen months.

In a separate report, the National Association of Realtors said that pending home sales rose by much more than expected, increasing for the sixth consecutive month.

Further, the Commerce Department's data on construction spending showed that spending fell modestly in the month of July, as a decrease in spending on public construction more than offset a modest increase in spending on private construction.

While the data largely provides further evidence of an economic recovery, many traders feel that the news has already been priced into the markets and doesn't support any further upside.

In corporate news, online auction giant eBay (EBAY) announced that it has signed an agreement to sell its Skype communications unit to a group of private investors for about $1.9 billion in cash and a $125 million note.

The major averages have moved roughly sideways in recent trading, stuck firmly in negative territory. The Dow is currently down 171.32 at 9,324.96, the Nasdaq is down 35.31 at 1,973.75 and the S&P 500 is down 20.26 at 1,000.36.

Sector News

Airline stocks are seeing some of the day's worst performances, with the NYSE Arca Airline Index posting a 4.2 percent loss in early afternoon trading. With the retreat, the index is moving further away from the seven-month closing high set late last month.

Brokerage stocks are also moving considerably lower, as reflected by the 3.8 percent loss being shown by the NYSE Arca Securities Broker/Dealer Index. The loss by the index comes after it ended the previous session at its best closing level in almost eleven months.

Banking and healthcare provider stocks are also retreating, moving off of multi-month highs. The Kbw Bank Index is down by 4.2 percent, moving off of last week's eight and a half month closing high, while the Morgan Stanley Healthcare Provider Index is down by 3.7 percent, falling away from last month's yearly high.

Biotechnology, housing, networking and steel stocks are also moving substantially lower, reflecting the day's weakness in a broad variety of market segments.

Stocks In The News

Biopharmaceutical company Acadia Pharmaceuticals Inc. (ACAD) is plunging after announcing that its first Phase III trial with pimavanserin in patients with Parkinson's disease psychosis, or PDP, did not meet its primary endpoint of antipsychotic efficacy.

Shares of Acadia are down 67.6 percent, moving further off the fourteen-month high set last month and falling to their worst intraday level in over three months.

CIT Group (CIT) is also retreating amid news that it is postponing the payment of interest on junior notes. The stock is falling by 13.3 percent, although it remains stuck in a recent trading range.

On the other hand, Nice Systems (NICE) is moving higher after acquiring tech firms Hexagon and Fortent and announcing its intention to continue acquisitions. The stock is up by 4 percent and reached its best intraday price in nearly a year at its highs for the session.

In Focus: Economic Data

As mentioned above, the Institute for Supply Management released a report showing that its manufacturing index jumped to 52.9 in August from 48.9 in July, with a reading above 50 indicating an expansion in the sector following eighteen consecutive months of contraction.

With the increase, the index rose to its highest level since June of 2007. On average, economists had been expecting a more modest increase by the index to a reading of 50.2, which would have still indicated modest growth in the sector.

Separately, pending home sales rose 3.2 percent to 97.6 in July from a reading of 94.6 in June. The increase, which exceeded economist estimates of 1.5 percent growth, lifted the index to its highest level since June of 2007.

Meanwhile, the Commerce Department released a report showing that construction spending fell 0.2 percent in July following a downwardly revised 0.1 percent increase in June. Economists had expected spending to fall 0.2 percent compared to the 0.3 percent increase originally reported for the previous month.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region closed mostly higher on Tuesday. Japan's benchmark Nikkei 225 Index closed up 0.4 percent, although it was well off its best levels of the day.

Meanwhile, the major European closed notably lower, with the French CAC 40 Index and the U.K.'s FTSE 100 sliding by 1.9 percent and 1.8 percent, respectively while the German DAX Index fell by 2.5 percent.

In the bond markets, treasuries have turned positive amid the pullback on Wall Street. Subsequently, the yield on the benchmark ten-year note is trading at 3.383 percent, posting a loss of 1.8 basis points.

For comments and feedback: contact editorial@rttnews.com