RTTNews - Stocks continue to show notable weakness in early afternoon trading on Wednesday, as traders react to disappointing economic data released earlier in the day. The major averages fell considerably following a report on retail sector performance and have seen some further downside since then.

Traders digested a report from the U.S. Commerce Department that showed retail sales fell 0.4 percent in April following a revised 1.3 percent decrease in March. Economists had expected sales to come in unchanged compared to the 1.2 percent decrease originally reported for the previous month.

Noting that the increases in sales seen earlier this year were the most significant green shoots in the economic landscape, Chris Low, chief economist at FTN Financial said the back-to-back declines in sales in March and April throw the economic recovery into doubt.

In a separate report, the Labor Department said import prices rose 1.6 percent month-over-month in April compared to a revised 0.2 percent increase in the previous month. The increase reflected a 15.4 percent increase in petroleum import prices. On a year-over-year basis, import prices were down 16.3 percent.

Export prices rose at a 0.5 percent rate in April compared to a 0.7 percent decline in March. Agricultural export prices climbed 3.6 percent compared to a 0.3 percent decline in the prices of non-agricultural exports. On a year-over-year basis, export prices declined 6.8 percent.

Earlier in the day, retailer earnings were kicked off by a report from Macy's (M) that showed an adjusted loss that was narrower than expected. Nonetheless, Macy's stock is down by 3.5 percent as retail stocks are under pressure following the worse-than-expected retail sales report.

Other retailers set to report their results include Wal-Mart (WMT), J.C. Penney (JCP) and Abercrombie & Fitch (ANF), which are scheduled to announce earnings over the next two days.

Meanwhile, the world's largest semiconductor company Intel (INTC) was fined a record $1.45 billion for its sales tactics in the European Union. The fine was the largest anti-trust action levied against a firm in EU history. Shortly afterward, Intel CEO Paul Otellini announced the company would appeal the verdict.

Elsewhere, the House Oversight and Government Reform Committee is hearing testimony from AIG (AIG) Chief Executive Edward Liddy on the insurer's plan to pay back billions of taxpayer dollars.

The major averages have moved roughly sideways in recent trading, stuck firmly in negative territory. The Dow is currently down 155.95 at 8,313.16, the Nasdaq is down 36.27 at 1,679.65 and the S&P 500 is down 18.45 at 889.90.

Sector News

Most of the major sectors are under pressure in early afternoon trading, reflecting broad based weakness in the markets amid concerns about the economic outlook.

Significant weakness has emerged in the housing sector, as reflected by the 5.9 percent loss currently being shown by the Philadelphia Housing Sector Index. With the fall, the index continues to move away from the six month closing high set early last week.

The housing sector is being pulled down by shares of Radian Group Inc. (RDN) and Palm Harbor Homes Inc. (PHHM), which are down by 10.5 and 9.4 percent, respectively.

Steel stocks are also continuing to turn in some of the worst performances of the day amid the dampened economic outlook. The Amex Steel Index is currently down 7.3 percent, pulling back further off its recent seven-month closing high.

Among steel stocks, shares of Cliffs Natural Resources Inc. (CLF) are down by 17.2 percent on the day. The loss by Cliffs comes after BMO Capital Markets downgraded its rating on the stock to Market Perform from Outperform.

Significant weakness has also emerged in the real estate sector, as reflected by the 5.2 percent loss currently being shown by the Morgan Stanley REIT Index. Weakness is also visible among transportation stocks, pushing the Dow Jones Transportation Average lower by 4.3 percent.

On the other hand, pharmaceutical stocks are pushing the Amex Pharmaceutical Index up 1.1 percent, with Merck (MRK) up 3.4 percent as the firm gears up for the launch of a new antipsychotic drug.

Stocks in the News

Shares of MGM Mirage (MGM) by are down by 20 percent as the firm announced an underwritten public offering of 81.0 million shares of its common stock, raising concerns of share dilution among investors. With the loss, MGM is pulling back further off the three-month closing high it set on Monday.

Additionally, Seagate Technology (STX) is down 7 percent following news that the company has initiated a restructuring plan that includes a reduction of about 1,100 employees, or 2.5 percent of the company's global workforce. With the decline, shares have given back the majority of recent gains.

On the other hand, Advanced Micro Devices (AMD) is up by 4.8 percent following the launch of the first 1 gigahertz graphics processor card. With the advance, the stock has climbed to its highest level since October.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region turned in another mixed performance on Wednesday. While Japan's benchmark Nikkei 225 Index closed up 0.4 percent, Hong Kong's Hang Seng Index slipped 0.5 percent.

Meanwhile, the major European markets all closed lower, pulling back further off their recent highs. The U.K.'s FTSE 100 Index closed down 2.1 percent, while the French CAC 40 Index and the German DAX Index also finished lower by 2.4 percent and 2.6 percent, respectively.

In the bond market, treasuries are showing considerable strength following the weak retail sales data and the sell-off on Wall Street. Subsequently, the yield on the benchmark ten-year note is currently down 6.6 basis points at 3.109 percent.

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