Stocks are seeing continued weakness in early afternoon trading on Tuesday, with the major averages stuck firmly in negative territory after failing to sustain a mid-morning recovery attempt. A negative reaction to disappointing retail sales data is helping to keep the major averages in the red.

In an interview with RTT News, Paul Nolte, director of investments at Hinsdale Associates, said that we are still in a bear market and predicted that the S&P 500 could go back down to the 700 level over the course of the year, before we finally put those numbers behind us.

It's been a lot of the lower quality companies that have done the best in this rally and that's not something that you can build a long term bull market on, Nolte added.

In corporate news, Goldman Sachs (GS) saw a first quarter profit that rose year-over-year and came in well above analyst estimates. Goldman Sachs also said that it has commenced a $5 billion public offering of its common stock, which along with additional resources, may be used to repay TARP funds.

Additionally, Dow component Johnson & Johnson (JNJ) also released first quarter results that exceeded analyst estimates. The company posted earnings of $1.26 per share compared to the $1.22 per share that was anticipated.

On the economic front, the Commerce Department said that retail sales fell 1.1 percent in March following an upwardly revised 0.3 percent increase in February. The decrease came as a surprise to economists, who had expected sales to increase by 0.3 percent.

The unexpected drop in retail sales was partly due to a 5.9 percent drop in sales by electronics and appliance stores. Auto sales also showed a notable decrease for the month.

Separately, the Labor Department said that its producer price index fell 1.2 percent in March compared to economist estimates of a flat reading. Core producer prices, which exclude food and energy prices, were unchanged compared to the previous month.

In other news, Federal Reserve Chairman Ben Bernanke said earlier that there have been tentative signs of a slowing in the steep economic decline, offering hope that the worst of the recession may be drawing to a close.

Speaking at Atlanta's Morehouse College, Bernanke also addressed the Fed's continued commitment to prices stability, although he noted that inflation is likely to remain exceptionally low for some time.

Separately, President Barack Obama reiterated that while encouraging news is becoming more apparent in the market, it does not mean hard times are over.

Obama explained that 2009 will continue to be a difficult year, but he said the recovery plan has encouraged construction and energy companies to rehire workers.

The major averages are currently all posting steep losses, although they are off their worst levels of the day. The Dow is currently down 85.62 at 7,972.19, the Nasdaq is down 19.37 at 1,633.94 and the S&P 500 is down 9.97 at 848.76.

Sector News

While some sectors have shown a lack of direction over the course of the trading day, real estate stocks have remained under pressure throughout the session. The Morgan Stanley REIT Index is currently down 4.5 percent after ending the previous session at a two-month closing high.

Among real estate stocks, One Liberty Properties Inc. (OLP) is turning in one of the worst performances, suffering a 7 percent loss. With the loss, One Liberty has pulled back further off the nearly two-month closing high it set last Thursday.

Banking stocks are also seeing considerable weakness in early afternoon trading, resulting in a 3.5 percent loss by the Kbw Bank Index. The weakness in the sector comes as traders cash in on the standout gains posted in the two previous sessions.

Significant weakness is also visible in the airline sector, as reflected by the 3.6 percent loss currently being posted by the Amex Airline Index. Tobacco, housing, and brokerage stocks are also posting considerable losses.

At the other end of the spectrum, healthcare provider stocks continue to post strong gains, driving the Morgan Stanley Healthcare Provider Index up 4.2 percent. Some strength also remains visible among trucking, oil service, and gold stocks.

Stocks In The News

Among individual stocks, apparel retailer Talbots Inc. (TLB) is suffering a loss of 24.3 percent on the day. With the decline, the stock has pulled back substantially off the five-month closing high it set on Monday.

The loss by Talbots comes after the company reported a fourth-quarter loss that widened substantially year-over-year and provided first-quarter guidance that failed to please investors.

Additionally, Fidelity National Financial Inc. (FNF) is down 10.4 percent on the session after the company announced plans to make a public offering of 13.3 million shares of its common stock. The company said it would use the net proceeds from this offering for general corporate purposes, including to repay debt under its existing $1.1 billion syndicated credit agreement.

Meanwhile, Dendreon Corp. (DNDN) is up a massive 141.5 percent after the drug-maker said that the pivotal Phase 3 IMPACT study of Provenge in men with advanced prostate cancer achieved its primary endpoint of improving overall survival compared to a placebo control.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region closed mostly higher on Tuesday, with financial stocks leading the way higher following the release of the better than expected results from Goldman Sachs.

Additionally, after seeing some uncertainty, the major European markets have all moved back into positive territory. The U.K.'s FTSE 100 is up 0.1 percent, while the German DAX Index and the French CAC 40 Index are posting gains of 1.5 percent and 0.9 percent, respectively.

In the bond market, treasuries are continuing to see strength, moving back towards their highs of the day. Subsequently, the yield on the benchmark 10-year note is down 5.1 basis points at 2.794 percent.

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