While selling pressure has waned from earlier in the session, stocks continue to see some weakness in early afternoon trading on Tuesday. The major averages have moved well off their lows for the session, but they remain stuck in the red.

Profit taking is contributing to the weakness in the markets, with the losses by the major averages coming after they ended the previous session at multi-month highs. The Nasdaq is posting a notable loss after setting a six-month closing high on Monday.

Traders have largely shrugged off comments from Federal Reserve Chairman Ben Bernanke, who told the Joint Economic Committee of Congress that the pace of contraction in the U.S. economy may be slowing.

While the Fed chairman also said that recent data shows some signs that the beleaguered housing market may be bottoming, he noted that the available indicators of business investment remain extremely weak.

Looking forward, Bernanke said economic activity is expected to bottom out then turn up later this year. Nonetheless, he noted that the rate of growth of real economic activity is likely to remain below its longer-run potential for a while.

In other news, the Institute for Supply Management released a report showing the seventh month of contraction in service sector activity in the month of April, although the pace of contraction slowed even more than economists had expected.

The ISM said its index of activity in the service sector rose to 43.7 in April from 40.8 in March, with a reading below 50 indicating a contraction in the sector. Economists had been expecting a more modest increase to a reading of 42.2.

Meanwhile, despite the weakness in the broader markets, Dow component Kraft Foods (KFT) is holding onto a strong gain after the food maker reported first quarter earnings that rose more than analysts had expected.

The major averages have moved roughly sideways in recent trading, lingering well below the unchanged line. The Dow is currently down 18.24 at 8,408.50, the Nasdaq is down 18.69 at 1,744.87 and the S&P 500 is down 4.77 at 902.47.

Sector News

With traders doing some profit taking following the strength seen in the previous session, banking stocks are seeing notable weakness in early afternoon trading. The S&P Banks Index is currently down 1.6 percent after ending Monday's trading at a three-month closing high.

The pullback by banking stocks comes as traders express some uncertainty about the outcome of the government's stress tests, with reports suggesting that the government may determine that several banks need to raise additional capital.

Natural gas stocks also remain under pressure, resulting in a 3.3 percent loss by the Amex Natural Gas Index. The continued weakness in the sector comes amid a notable decrease by the price of natural gas, which is down about 3.9 percent on the day.

A variety of other sectors are also seeing continued weakness, with real estate, railroad, and electronic storage stocks posting notable losses.

Meanwhile, significant strength has emerged in the airline sector, as reflected by the 5 percent gain currently being shown by the Amex Airline Index. The index is currently poised to end the session at a nearly two-month closing high.

Health insurance and healthcare provider stocks have also shown notable moves to the upside, helping to lift the major averages off their worst levels of the day.

Stocks In The News

After trending higher for much of the past two months, shares of Hologic (HOLX) are seeing significant weakness in early afternoon trading. The medical diagnostics company is currently down 21.1 percent after ending the previous session at a nearly seven-month closing high.

The loss by Hologic comes after the company delayed the U.S. launch of its Tomosynthesis mammography system. The announcement of the delay came as the company reported better than expected adjusted second quarter earnings.

Shares of Legg Mason (LM) are also under pressure after the asset manager reported a narrower than expected fourth quarter loss but also slashed its quarterly dividend by 88 percent. Legg Mason is currently down 11.1 percent after setting a three-month closing high on Monday.

On the other hand, shares of Molson Coors (TAP) are currently up 10.6 percent after the beer company reported stronger than expected first quarter earnings growth. At its high for the session, Molson Coors was at a three-month intraday high.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region closed mostly higher on Tuesday, although the Japanese market remained closed the second straight day. Hong Kong's Hang Seng Index ended the session up 0.3 percent.

Meanwhile, the major European markets turned in a mixed performance. The U.K.'s FTSE 100 Index surged up 2.2 percent after the London market was closed on Monday, while the French CAC 40 Index and the German DAX Index fell 0.4 percent and 1.0 percent, respectively.

In the bond market, treasuries are turning in another lackluster performance, unable to sustain any significant moves. Subsequently, the yield on the benchmark ten-year note has bounced back and forth across the unchanged line and is currently up 1.4 basis points at 3.171 percent.

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