RTTNews - Stocks have shown a lack of direction over the course of the trading day on Tuesday, with the major averages having difficulty sustaining any significant moves after ending the previous session sharply higher. Traders are expressing some uncertainty about the outlook for the markets.
Earlier in the session, the markets benefited from the release of a report from the National Association of Realtors showing that pending home sales increased by much more than expected in the month of April. The increase came as homebuyers responded to very favorable market conditions.
While the data helped the major averages bounced well off their lows for the session and into positive territory, buying interest waned shortly afterward. Some traders were reluctant to continuing buying stocks following the substantial rally seen on Monday.
Stocks have subsequently moved back to the downside, with traders doing some profit taking following the recent gains. Nonetheless, the major averages are hanging onto the bulk of the standout gains posted in the previous session.
The major averages are currently lingering near the unchanged line, turning in a mixed performance. While the Nasdaq is up 0.24 at 1,828.92, the Dow is down 1.29 at 8,720.15 and the S&P 500 is down 0.42 at 942.45.
With traders expressing some uncertainty, the major sectors are turning in a roughly mixed performance, contributing to the choppy trading by the major averages.
Airline stocks continue to enjoy notable gains on the day, with the Amex Airline Index up by 5.2 percent. With the gain, the index is moving further off the nearly two-month closing low that it set last week, rising to its best intraday level in three weeks.
AMR (AMR) and Continental Airlines (CAL) are leading the sector higher, advancing by 11.6 percent and 10.8 percent, respectively. The gain by Continental comes after J.P. Morgan upgraded its rating on the airline to Overweight from Neutral.
Significant strength also remains visible among housing stocks, as reflected by the 1.5 percent gain currently being shown by the Philadelphia Housing Sector Index. The strength in the sector comes as traders react to the better than expected pending home sales data.
Gold, health insurance, and biotechnology stocks are also holding onto strong gains, with gold stocks benefiting from a modest increase by the price of the precious metal.
Meanwhile, semiconductor stocks are continuing their pullback, as reflected by the 3.9 percent retreat being shown by the Philadelphia Semiconductor Index. With the decline, the index is pulling back well off the nearly eight-month closing high it set on Monday.
Banking stocks are also under pressure after several financial giants announced capital raising plans, dragging the S&P Banks Index down 3.4 percent. Some computer hardware, natural gas, and networking stocks are also posting notable losses.
Stocks In the News
Shares of Data Domain (DDUP) are seeing considerable strength on the day after EMC (EMC) made a bid of $1.8 billion for the firm, besting NetApp's (NTAP) offer of $1.5 billion. Data Domain has soared following the bid, jumping by 19.1 percent on the day, reaching its best level in over 18 months.
Pepsi Bottling Group (PBG) is also on the rise after raising its second quarter and full year earnings guidance. The stock is up by 3.3 percent on the day, reaching its best intra-day level in over 13 months.
On the other hand, Lions Gate Entertainment (LGF) is sliding after the firm reported a wider than expected fourth quarter loss compared to a year-ago profit. Shares of Lion gate are down by 13.9 percent, backing off their best closing level in more than five months.
In Focus: Pending Homes Sales Data, Corporate News
Industry data from the National Association of Realtors showed that the pending home sales index rose 6.7 percent to 90.3 in April from a reading of 84.6 in March. Economists had been expecting a much more modest increase by the index of about 0.5 percent.
In corporate news, General Motors revealed late this morning that it has entered into a memorandum of understanding, or MoU, with a buyer for its premium off-road brand Hummer. The deal would save around 3000 jobs in the U.S.
GM said that the transaction is the result of its strategic review of the Hummer brand and the company's ongoing restructuring efforts. Under the terms of the MoU, the identity of the purchaser and proposed financial terms of the agreement are not being officially released at this time.
Meanwhile, financial services provider JP Morgan Chase (JPM) said Monday that it plans to raise around $5 billion in common equity as part of its effort to repay $25 billion of the capital it received from the federal bailout fund.
American Express (AXP) also revealed that it has commenced a public offering of $500 million of its common stock. Part of the funding is expected to go to a repurchase of $3.4 billion of preferred shares issued to the U.S. Treasury as part of the Capital Purchase Program.
In other news, shares of DeVry (DV) are moving higher after Standard & Poor's announced that the education company would replace General Motors in the S&P 500. Devry is currently posting a 4.1 percent gain.
In overseas trading, stock markets across the Asia-Pacific region finished mixed. Japan's benchmark Nikkei 225 Index edged up by 0.3 percent, while Hong Kong's Hang Seng fell 2.6 percent.
The major European markets also turned in a mixed performance. The French CAC 40 Index slipped by less than a tenth of a percent, while the German DAX Index rose by a minute margin. The U.K.'s FTSE 100 Index dropped by 0.7 percent.
In the bond markets, treasuries are regaining some ground after ending the previous session sharply lower. Subsequently, the yield on the benchmark ten-year note is trading at 3.646 percent, a drop of 6.9 basis points on the day.
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