Considerable weakness remains visible on Wall Street in early afternoon trading on Tuesday, as traders continue to cash in on the market's recent gains. Anxiety about the upcoming earnings season has inspired some of the profit taking.
Dow component 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.
However, with most companies expected to report disappointing first quarter results due to the weakness in the economy, the guidance provided by the companies is likely to have a more significant impact on the markets.
In corporate news, Royal Bank of Scotland (RBS) announced that it has begun consulting Unite and other employee representatives about a business plan for its back office operations that will involve job losses.
The bank said that the plan could affect up to 9,000 jobs over the next two years, including 4,500 in the U.K. However, the actual number of jobs lost is expected to be significantly lower.
Some selling pressure has also 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.
The major averages have moved roughly sideways in recent trading, lingering near their worst levels of the day. The Dow is currently down 164.87 at 7,810.98, the Nasdaq is down 30.32 at 1,576.39 and the S&P 500 is down 14.60 at 820.88.
While a variety of sectors have shown notable declines, trucking stocks are posting some of the widest losses of the day, dragging the Dow Jones Trucking Index down 5.4 percent. With the loss, the index is pulling back further off the nearly two-month closing high it set on Friday.
The weakness in the sector is partly due to news that YRC Worldwide (YRCW) expects to report first quarter charges of up to $185 million as a result of an ongoing restructuring and the uncertain U.S. economy. YRC is leading the sector lower, falling 21.7 percent.
Housing and real estate stocks are also showing considerable weakness, with the Philadelphia Housing Index posting a loss of 4.6 percent and the Morgan Stanley REIT Index down 4.3 percent.
Wireless, computer hardware, and steel stocks are also helping to drive the broader markets lower on the day. Within the wireless sector, Nokia (NOK) is down 5 percent after WestLB downgraded its rating on the mobile phone maker to Sell from Neutral.
At the other end of the spectrum, gold and tobacco stocks are posting strong gains on the day, with the Amex Gold Bugs Index and the Amex Tobacco Index up 1.4 percent and 1.7 percent, respectively. Some health insurance and healthcare provider stocks are also posting strong gains.
Stocks In The News
While weakness continues to prevail in the broader markets, Brinker International Inc. (EAT) is bucking the downtrend, posting a gain of 3 percent after releasing strong guidance for the upcoming quarter. At its best level of the day, Brinker was at a six-month intraday high.
The company said it expects third quarter earnings, before special items, of $0.44 to $0.45 per share compared to $0.33 per share in the year-ago quarter. Analysts polled by Thomson Reuters had expected the company to earn $0.29 per share for the quarter.
Additionally, First Niagara Financial Group Inc. (FNFG) is posting a gain of 13.6 percent after the company announced that it has signed a definitive agreement to acquire $4.2 billion of deposits and 57 Western Pennsylvania bank branches from National City Bank, a subsidiary of PNC Financial (PNC), for a deposit premium of 1.3 percent.
In addition to $3.2 billion in cash, First Niagara will also receive about $839 million of performing business and consumer loans.
Meanwhile, Ventas Inc. (VTR) is suffering a loss of 3.7 percent after the company said that it plans to sell 8.5 million shares and $200 million of senior notes. At the same time, the company confirmed its operating financial guidance for 2009.
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 seeing notable weakness on the day. The U.K.'s FTSE 100 Index is down 1.6 percent, while the French CAC 40 Index and the German DAX Index are falling 0.9 percent and 0.6 percent, respectively.
In the bond market, treasuries have come off their highs of the day but remain well above the unchanged line. Subsequently, the yield on the benchmark 10-year note is down 4.3 basis points at 2.896 percent.
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