RTTNews - Stocks are showing notable weakness in mid-morning trading on Wednesday, partly offsetting the gains posted in recent sessions. The major averages opened lower and are all in negative territory as traders react to largely disappointing economic data.

Service sector activity contracted at a slightly slower rate in the month of May, according to a report released by the Institute for Supply Management, although the index of activity in the sector increased by less than economists had expected.

The ISM said its index of activity in the service sector rose to 44.0 in May from 43.7 in April, although a reading below 50 indicates a continued contraction in the sector. Economists had been expecting a somewhat more notable increase to a reading of 45.0.

While the Commerce Department released a separate report showing a notable increase in factory orders in the month of April, the increase came after a substantial decline in the previous month and came in slightly below economist estimates.

The report showed that orders for manufactured goods rose 0.7 percent in April following a revised 1.9 percent drop in March. Economists had expected orders to increase by 0.9 percent compared to the 0.9 percent decrease originally reported for the previous month.

Additionally, private sector employment experienced another notable decline in the month of May, according to a report released by Automatic Data Processing, Inc. (ADP), with the decrease in jobs slightly exceeding economist estimates.

ADP said non-farm private employment fell by 532,000 jobs in May following a revised decrease of 545,000 jobs in April. Economists had expected a decrease of about 525,000 jobs compared to the decline of 491,000 jobs originally reported for the previous month.

Traders are also digesting comments from Federal Reserve Chairman Ben Bernanke, who is testifying before the House Budget Committee on the current state of the economy.

In other news, the New York arm of the Fed is purchasing treasuries set to mature between May of 2016 and May of 2019. The results of the buyback are set to be revealed at 11:00 a.m. ET.

On the corporate front, NetApp (NTAP) said it has made a revised proposal to acquire Data Domain (DDUP). As per the terms of the proposal, NetApp will acquire all outstanding shares of Data Domain common stock for $30 per share in cash and stock in a transaction valued at approximately $1.9 billion.

Shares of Data Domain are currently up by 2.9 percent on the day after reaching their best intraday level in over 18 months earlier in the session.

Meanwhile, Toll Brothers (TOL) reported a second quarter net loss of $83.17 million or $0.52 per share, compared to a net loss of $93.74 million or $0.59 per share last year. Excluding write-downs, the loss was $5.2 million, or $0.03 per share. Wall Street analysts expected a loss of $0.44 per share.

The major averages have moved roughly sideways in recent trading, stuck firmly in negative territory. The Dow is currently down 95.02 at 8,645.85, the Nasdaq is down 16.37 at 1,820.43 and the S&P 500 is down 13.77 at 930.97.

Sector News

The major sectors are firmly treading in negative territory on the day, helping to drag down the major averages in mid-morning dealing.

Some of the day's worst performances are being turned in by steel stocks, as reflected by the 5.7 percent pullback being shown by the Amex Steel Index. With the retreat, the index is pulling back well off an eight month high set in the previous session.

Further weakness has emerged among oil service and gold stocks, with the Philadelphia Oil Service Index and the Amex Gold Bugs Index slipping by 5.1 percent and 3.9 percent, respectively. The retreat comes as crude oil has dropped nearly $1 a barrel and gold is down by $7.70 an ounce.

Significant weakness is also present in the housing, semiconductor, and healthcare sectors. The losses by housing stocks may be partly due to the release of a report showing a notable decline in mortgage applications last week.

Meanwhile, biotechnology stocks are among the few gainers on the day, with the Amex Biotechnology Index up by 1.9 percent on the day.

Stocks Driven By Analyst Comments

Shares of Group 1 Automotive (GPI) are sliding in mid-morning trading following a downgrade to Market Perform from Outperform by Wachovia, which said the firm's stock has risen too far too fast. Group 1 Automotive is down by 3.9 percent on the day, backing off of an eight month closing high set in the previous session.

Pacer International (PACR) is also retreating after being downgraded to Underperform from Neutral by Robert W. Baird. The stock has fallen by 17.6 percent in mid-morning dealing, moving to the lower portion of a recent trading range.

On the other hand shares of Hub Group (HUBG) are on the upside after KeyBanc Capital Markets raised its rating on the firm's stock to Buy from Hold. Hub Group is currently up by 14.2 percent on the session after reaching its best intra-day level in over three weeks in earlier trading.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region finished modestly higher on Wednesday. Japan's benchmark Nikkei 225 Index rose by 0.4 percent, while Hong Kong's Hang Seng climbed by 1 percent.

Meanwhile, the major European markets are currently all moving lower. The U.K.'s FTSE 100 Index is down 2.3 percent, while the French CAC 40 Index and the German DAX Index are down 2.5 percent and 1.5 percent, respectively.

In the bond markets, treasuries are holding onto strong gains. Subsequently, the yield on the benchmark ten-year note is down to 3.578 percent, a drop of 6.6 basis points on the day.

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