After seeing substantial strength in the previous session, stocks have given back some ground over the course of the trading day on Tuesday. The major averages have all moved firmly into negative territory.

While the major averages have pulled back off their multi-month closing highs, they have only partly offset Monday's standout gains, which could be seen as a positive sign for the near-term outlook for the markets.

In an interview with RTT News, Ken Tower, senior vice president of Institutional Research at Quantitative Analysis Service, said the market has turned a major corner, predicting a decent rally in the second half of the year.

While Tower said it's not likely to be a traditional three year bull market cycle, he said we should be able to get a very nice, strong rally from May or June on.

In the near-term, however, Tower warned, We're working towards a correction, noting We're seeing the momentum slowly dissipate. Tower said this would be the opportunity for investors who haven't loaded up on stocks to re-enter the marketplace.

Earlier in the day, Federal Reserve Chairman Ben Bernanke testified before the Joint Economic Committee of Congress, noting that recent data suggested that the pace of contraction in the U.S. economy may be slowing.

While the Fed chairman also said that recent data shows some signs that the beleaguered housing market may be bottoming, he noted that the available indicators of business investment remain extremely weak.

Looking forward, Bernanke said economic activity is expected to bottom out then turn up later this year. Nonetheless, he noted that the rate of growth of real economic activity is likely to remain below its longer-run potential for a while.

Separately, the Institute for Supply Management released a report showing the seventh month of contraction in service sector activity in the month of April, although the pace of contraction slowed even more than economists had expected.

The ISM said its index of activity in the service sector rose to 43.7 in April from 40.8 in March, with a reading below 50 indicating a contraction in the sector. Economists had been expecting a more modest increase to a reading of 42.2.

The major averages have been more or less rangebound over the course of the afternoon, stuck firmly in negative territory. The Dow is currently down 31.78 at 8,394.96, the Nasdaq is down 20.19 at 1,743.37 and the S&P 500 is down 5.96 at 901.28.

Dow Components

While only a slim majority of the Dow components are trading in negative territory, notable losses by several of the blue chip stocks are helping to keep the index in the red.

After closing higher in the four previous sessions, shares of Intel (INTC) are showing a notable move back to the downside. The semiconductor giant is currently down 3 percent after ending Monday's trading at a more than six-month closing high.

Shares of Alcoa (AA) are also under pressure after ending the previous session at a nearly four-month closing high, with the aluminum producer currently down 3 percent.

JP Morgan (JPM), Procter & Gamble (PG), and American Express (AXP) are also under considerable selling pressure. While shares of JP Morgan are down 2.9 percent, shares of Procter & Gamble are down 2.8 percent and shares of AmEx are down 2.7 percent.

At the other end of the spectrum, shares of Kraft (KFT) are currently up 5.3 percent after the food maker reported first quarter earnings that rose more than analysts had expected. Earlier in the session, Kraft reached its best intraday level in almost three months.

Strong gains by Citigroup (C) and Bank of America (BAC) have also helped to limit the downside for the Dow, with shares of Citigroup currently up 5.3 percent and shares of Bank of America up 4.3 percent.

Sector News

Most of the major sectors are seeing continued weakness, as traders cash in on the strong gains posted in the previous session. Real estate stocks are posting notable losses, dragging the Morgan Stanley REIT Index down 4 percent off the three-month closing high set on Monday.

Significant weakness also remains visible among natural gas stocks, which are moving lower along with the price of gas. With natural gas currently down $0.13 at $3.59 per million BTUs, the Amex Natural Gas Index is down 3.4 percent.

A variety of other sectors have also shown notable moves to the downside over the course of the session, with banking, electronic storage, and housing stocks turning in some of the market's worst performances.

Meanwhile, airline, healthcare provider, and health insurance stocks continue to buck the downtrend by the broader markets. The airline sector is benefiting from a positive reaction to the latest monthly traffic reports.

Other Markets

In overseas trading, stocks in the Asia-Pacific region saw some further upside on Tuesday after showing a notable upward move in the previous session. However, the Japanese market remained closed for the second straight day.

The major European markets turned in a mixed performance, as stocks in London played catch up after the market was closed on Monday. While the U.K.'s FTSE 100 Index jumped 2.2 percent, the French CAC 40 Index fell 0.4 percent and the German DAX Index fell 1.0 percent.

In the bond market, treasuries have moved back towards the unchanged line after seeing some weakness earlier in the afternoon. After reaching a high of 3.203 percent, the yield on the benchmark ten-year note is currently unchanged at 3.157 percent.

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