RTTNews - After moving to the downside early on, stocks are seeing continued weakness in early afternoon trading on Wednesday, as disappointing economic data has inspired traders to do some profit taking. The major averages are all in negative territory, although the pullback has been limited considering recent gains.

Equities saw some selling pressure after the Institute for Supply Management's report on activity in the service sector in the month of July showed that the pace of contraction in the sector unexpectedly accelerated from the previous month.

Earlier this morning, a report released by payroll processor Automatic Data Processing (ADP) showed that private sector employment saw another notable decline in the month of July, although the pace of job losses slowed to its slowest rate since October of 2008.

Meanwhile, the U.S. Commerce Department revealed that factory orders unexpectedly rose in June, with an increase in non-durable goods orders more than offsetting a drop in durable goods orders.

In earnings news, Procter & Gamble (PG) and Kraft Foods (KFT) reported results that beat Wall Street estimates, although their revenues fell short of forecasts. Traders also looked to results from Ralph Lauren (RL) and Electronic Arts (ERTS).

The major averages have moved off of their worst levels of the day but remain stuck firmly in the red. The Dow is currently down by 80.86 at 9,239.33, the Nasdaq is down 27.09 at 1,984.22 and the S&P 500 is down 7.33 at 998.32.

Sector News

Oil service stocks are continuing their disappointing outing in early afternoon trading, with the Philadelphia Oil Service Index posting a loss of 2.1 percent. The index is continuing to retreat from the seven-week closing high set on Monday.

The index is being led lower by shares of Baker Hughes (BHI), which have plunged by 7 percent. The decline comes after the firm reported earnings that fell short of analyst estimates.

Notable losses are also visible among health insurance stocks, as reflected by the 3.3 percent loss being shown by the Morgan Stanley Healthcare Provider Index. The loss is dragging the index further away from the ten-month closing high set last Thursday.

While transportation, tobacco, software and telecommunications stocks are also retreating, banking stocks continue to post strong gains on the day. Notably, the Kbw Banking Index is climbing by 2.4 percent, reaching its best intraday level in nearly thee months.

Further, commercial real estate stocks are also advancing, with the Morgan Stanley REIT Index posting a gain of 1.3 percent, besting its highest level of the year.

Stocks In The News

Dean Foods (DF) is retreating in early afternoon trading after the firm reported second quarter earnings and revenues that fell short of analyst forecasts. The stock is down by 7.5 percent, extending its recent losses and reaching its worst intraday level in over one month.

Electronic Arts is also sliding after reporting a wider first quarter loss on lower revenues compared to the same period last year. Shares of the video game maker are down by 6.7 percent, falling to a one-month intraday low.

On the other hand, shares of Whole Foods Market (WFMI) are moving sharply higher after the company beat earnings and revenue estimates for the third quarter. The stock has surged up by 16.5 percent, rising to its best level in nearly fifteen months earlier in the session.

In Focus: Economic Data, Earnings News

As mentioned above, the ISM said its index of activity in the service sector edged down to 46.4 in July from 47.0 in June, with a reading below 50 indicating a contraction in the sector. The decrease came as a surprise to economists, who had expected the index to rise to 48.0.

Meanwhile, the U.S. Commerce Department revealed that factory orders rose 0.4 percent in June, surprising economists, who had expected the measure to drop 0.8 percent. May's factory orders figure was revised slightly lower to show an increase of 1.1 percent compared to the 1.2 percent increase that was originally reported.

With regard to the labor market, ADP said non-farm private employment fell by 371,000 jobs in July following a revised decrease of 463,000 jobs in June. Economists had been expecting a decrease of about 350,000 jobs compared to the loss of 473,000 jobs originally reported for the previous month.

On the earnings front, Procter & Gamble reported fourth quarter net income of $0.80 per share, compared to $0.92 per share in the same quarter of last year. Wall Street analysts expected the company to report earnings of $0.79 per share for the quarter. Meanwhile, net sales came in at $18.66 billion for the quarter, falling short of the $19.32 billion forecast by analysts.

Kraft Foods said its second quarter net income was $0.56 per share, compared to $0.49 per share in the year ago quarter, which edged out analyst estimates of $0.54 per share.
Revenues declined 5.9 percent to $10.2 billion, failing to meet estimates of $10.37 billion.

Devon Energy Corp. (DVN) reported adjusted second quarter earnings of $0.85 per share, crushing analyst estimates of $0.59 per share. Revenues for the quarter declined to $2.09 billion from $3.55 billion in the year-ago quarter but still surpassed forecasts of $1.92 billion.

The markets are also looking ahead to results from Allstate (ALL), Sunoco (SUN) and XTO Energy (XTO), among others, set to report after the closing bell.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region finished Wednesday's trading markedly lower. Hong Kong's Hang Seng Index posted a loss 1.5 percent, while Japan's benchmark Nikkei 225 Index ended the session down by 1.2 percent.

The major European markets also closed lower, with the French CAC 40 Index and the U.K.'s FTSE 100 Index both posting losses of 0.5 percent, while the German DAX Index fell by 1.2 percent.

In the bond markets, treasuries are holding steady in positive territory. Subsequently, the yield on the benchmark ten-year note is trading at 3.657 percent, posting a loss of 2.2 basis points on the day.

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