Stocks have shown a substantial turnaround over the course of morning trading on Tuesday, with the major averages all pulling back into negative territory after seeing some initial strength. The downturn comes amid some uncertainty about the near-term outlook for the markets.
The initial strength came as some traders used the weakness that was seen in the previous session as an opportunity to get into the markets. A report showing a narrower than expected U.S. trade deficit in March may also have generated some buying interest.
While the Commerce Department report showed that the trade deficit widened to $27.6 billion in March from a revised $26.1 billion in February, economists had expected the deficit to widen to $29.0 billion compared to the $26.0 billion originally reported for the previous month.
Nonetheless, buying interest waned not long after the start of trading, as traders expressed continued concerns about whether the markets have come too far too fast in light of continued signs of economic weakness.
After trending higher for much of the past two months, shares of Ford (F) have come under considerable selling pressure after the automaker announced a public offering of 300 million shares of its common stock.
Ford said that it would use the proceeds for general corporate purposes, including funding a portion of the payments it is required to make to the Voluntary Employee Beneficiary Association (VEBA) retiree health care trust.
Shares of Bank of America (BAC) are showing a more modest decline amid reports that the company raised $7.3 billion by selling 13.5 billion shares of China Construction Bank. The company reportedly sold the shares at a 14 percent discount to their Monday close.
In other news, Atlanta Federal Reserve President Dennis Lockhart said that the financial crisis is less severe than it was following the height of the credit crunch in 2008, although he noted that it is far from over
I believe that conditions are now calmer, but it is too soon to breathe easy, Lockhart said in remarks to a conference in Jekyll Island, Georgia organized by the Atlanta Fed.
The major averages have moved off their lows for the session in recent trading, although they currently remain stuck in the red. The Dow is currently down 6.92 at 8,411.85, the Nasdaq is down 11.53 at 1,719.71 and the S&P 500 is down 3.79 at 905.45.
After seeing some initial strength, banking stocks have helped to lead the markets back to the downside over the course of the morning. The Kbw Bank Index is currently down 4.1 percent, pulling back further off the four-month closing high it set last Friday.
Capital One (COF), U.S. Bancorp (USB), and BB&T (BBT) are seeing further downside after coming under pressure on Monday after announcing plans to sell common stock in order to raise proceeds to repay funds received under the government's financial bailout program.
Airline stocks have also come under considerable selling pressure, dragging the Amex Airline Index down 4.6 percent. The weakness in the oil-sensitive sector may be partly due to a continued increase by the price of oil, which has climbed above $59 a barrel.
Significant weakness has also emerged in the housing sector, as reflected by the 2.9 percent loss currently being shown by the Philadelphia Housing Index. Semiconductor, electronic storage, and real estate stocks have also shown notable moves to the downside.
On the other hand, gold stocks are holding onto strong gains amid an increase by the price of the precious metal. With gold for June delivery currently up $4 at $917.50 an ounce, the Amex Gold Bugs Index is up 3 percent.
Stocks Driven By Analyst Comments
Shares of International Paper (IP) have come under pressure in morning trading, with the paper and packaging company currently down 7.5 percent. With the loss, International Paper is pulling back further off the six-month closing high it set last Friday.
The loss by International Paper comes after Deutsche Bank downgraded its rating on the company's stock to Hold from Buy. Deutsche Bank also downgraded its rating on Temple-Inland (TIN), noting that both stocks are near their price targets.
Shares of Cubic (CUB) are also under pressure after JP Morgan downgraded its rating on the stock to Neutral from Overweight. Cubic is down 4.6 percent after ending the previous session at its best closing level in over a year.
On the other hand, shares of TJX Cos. (TJX) are currently up 1 percent after Credit Suisse and Barclays both upgraded their ratings on the retailer.
In overseas trading, stock markets across the Asia-Pacific region turned in a mixed performance on Tuesday. While Japan's benchmark Nikkei 225 Index fell 1.6 percent on the day, Hong Kong's Hang Seng Index edged up 0.4 percent.
Meanwhile, the major European markets have moved to the downside in recent trading, with the U.K.'s FTSE 100 Index currently down 0.3 percent, while the French CAC 40 Index and the German DAX Index are receding 0.5 percent and 0.2 percent, respectively.
In the bond market, treasuries have climbed back near the unchanged line after seeing some weakness earlier in the trading session. The yield on the benchmark ten-year note is currently up less than a basis point at 3.186 percent after reaching a high of 3.226 percent.
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