Stocks are seeing considerable weakness in morning trading on Monday, as traders cash in on some of the market's recent gains. Renewed concerns about the outlook for the banking sector have offset any positive sentiment generated by some merger news.
Some additional selling pressure was generated by a report from the Conference Board showing that its leading economic indicators index fell by a little more than economists had been anticipating in March.
The Conference Board said its leading economic index fell 0.3 percent in March following a revised 0.2 percent decrease in February. The agency noted that the index has not risen in the past nine months.
Earlier weakness in the markets came as traders reacted negatively to quarterly results from financial services giant Bank of America (BAC). While Bank of America reported better than expected earnings, the company also took a substantial $13.4 billion provision for loan losses.
The company reported a first-quarter net profit of $4.2 billion. After preferred dividends, including $402 million paid to the U.S. government, net income applicable to common shareholders totaled $2.81 billion or $0.44 per share.
On average, 19 analysts polled by Thomson Reuters expected Bank of America to report earnings of $0.04 per share.
Meanwhile, Oracle (ORCL) announced a definitive, all cash, agreement to acquire Sun Microsystems (JAVA) for $9.50 per share, a total value of approximately $7.4 billion, or $5.6 billion net of Sun's cash and debt.
Oracle expects the acquisition to be a positive drive to its earnings by at least $0.15 on a non-GAAP basis in the first full year after closing.
Additionally, PepsiCo (PEP) offered to acquire both Pepsi Bottling Group (PBG) and PepsiAmericas (PAS), indicating that the soft drink maker is looking to take over its own bottling.
The major averages are currently posting substantial losses, lingering near their worst levels of the day. The Dow is currently down 211.15 at 7,920.18, the Nasdaq is down 51.86 at 1,621.21 and the S&P 500 is down 25.42 at 844.18.
Nearly all of the major sectors have come under pressure in morning trading, reflecting broad based weakness in the markets. Banking stocks are turning in some of the worst performances, as the news from Bank of America has raised some concerns about the outlook for the sector.
With the weakness in the sector, the Kbw Bank Index is down 8.2 percent on the day, moving well off the more than three month closing high it set in the previous session.
Among banking stocks, Capital One (COF) is currently posting a 15.8 percent loss after Goldman Sachs downgraded its rating on the company's stock to Neutral from Buy.
Oil service stocks are also seeing considerable weakness, dragging the Philadelphia Oil Service Index down 6.2 percent. The weakness in the oil sector comes as the price of crude oil suffers a substantial decline, with crude for May delivery down $3.56 at $46.77 a barrel.
Significant weakness is also visible among steel, real estate, natural gas and airline stocks. As mentioned above, a variety of other sectors are also showing steep declines.
At the other end of the spectrum, gold stocks are some of the only advancers. The Amex Gold Bugs Index is up 3.4 percent, as the price of the precious metal climbs $10 to $877.90 an ounce.
Stocks Driven By Analyst Comments
Blue Nile Inc. (NILE) is down a substantial 9.9 percent on the day after the stock was downgraded to Sell from Hold at Deutsche Bank. With the decline, the stock has pulled back well off the six-month closing high it set on Friday.
While Deutsche Bank said that diamond prices have come down in 2009, which helps Blue Nile save money, it said consumer demand for jewelry is slowing.
Additionally, Lam Research (LRCX) is down 6 percent after being downgraded to Equal Weight from Overweight at Barclays. The stock's price target was also lowered to $28 from $30. Barclays also lowered its full year 2009 estimate to a loss of between $1.02 and $0.42 per share.
Meanwhile, Palm (PALM) is posting a 4.2 percent gain after being upgraded to Buy at Merrill/BofA. Analysts upgraded the stock as they expect a successful launch of the Pre smartphone with Sprint Nextel.
In overseas trading, stock markets across the Asia-Pacific region closed mostly higher on Monday, with Chinese stocks showing notable strength due in part to the Chinese premier's upbeat assessment that the economy is doing better-than-expected.
Meanwhile, the major European markets are suffering notable losses and are holding near their lows of the day. The U.K.'s FTSE 100 Index is down 2.7 percent, while the French CAC 40 Index and the German DAX Index are falling 3.5 percent and 3.9 percent, respectively.
In the bond market, treasuries are showing considerable strength on the day, holding near their highs. With the advance, the yield on the benchmark 10-year note has been driven 7.7 basis points lower to 2.853 percent.
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