After trending lower throughout much of the morning, stocks regained some ground over the course of afternoon trading on Monday, although they remained mostly negative. The major averages all ended the day lower after closing higher in the four previous sessions.
The notable decline seen in morning trading came as traders cashed in some of the recent gains amid some disappointing corporate news and negative analyst comments.
Sun Microsystems (JAVA) helped to lead the technology sector lower after media reports said that acquisition talks between IBM (IBM) and Sun have collapsed, putting the deal at risk of failure.
The reports said that Sun's board rejected a formal acquisition offer by IBM on Saturday, sending a notice terminating Sun's deal to hold talks exclusively with IBM. In response, IBM reportedly withdrew its offer to acquire Sun on Sunday.
Additionally, bank stocks saw notable weakness in reaction to negative comments from veteran banking analyst Mike Mayo, who recently left Deutsche Bank AG to join Calyon Securities.
Mayo initiated coverage of several banks with either Sell or Underperform ratings, citing concerns about increased loan losses and the belief that government actions might not help as much as expected.
In an interview with RTT News, Joseph Saluzzi, co-head of equity trading at Themis Trading, said the market's pullback was to be expected because we ran too far too fast.
It was certainly an overbought condition, said Saluzzi, who predicted that the market would continue to sink lower. He said, I certainly think we hit the lows again.unless we start to see some real fundamental news.
Saluzzi classified the latest run higher as a bear market rally and warned investors, The black swan is still out there.we just don't know where it is.
In other news, the U.S. Treasury Department has extended the deadline for applications to its public-private initiative to buy up distressed assets from banks. The deadline has been pushed out two weeks until April 24.
The treasury's program allows fund managers to participate with the government in an initiative aimed at taking distressed assets off the balance sheets of banks. These assets have become nearly impossible to sell since the financial turmoil that set in last year, forcing banks to announce huge write-offs and putting the overall financial system in jeopardy.
Meanwhile, President Barack Obama told Turkish lawmakers Monday that he stood behind their bid to join the European Union. The president also stressed that the U.S. remains a friend to the Muslim world, even as the country fights Islamic terrorism.
The major averages showed a notable upward move going into the close but still ended the day in the red. The Dow closed down 41.74 points or 0.5 percent at 7,975.85, the Nasdaq closed down 15.16 points or 0.9 percent at 1,606.71 and the S&P 500 closed down 7.02 points or 0.8 percent at 835.48.
With the news from Sun Microsystems and IBM, the computer hardware sector was one of the worst performers of the day, with the Amex Computer Hardware Index closing down 4.2 percent after ending Friday's trading at a six-month closing high.
Sun helped to lead the way lower, with the server and software maker closing down 22.7 percent. With the loss, Sun ended the session at its worst closing level since the Wall Street Journal first reported on the talks between Sun and IBM.
Significant weakness was also visible in the gold sector, as reflected by the 4.1 percent loss posted by the Amex Gold Bugs Index. The weakness in the sector came amid a notable decrease by the price of the precious metal, which fell $24.50 to $872.80 an ounce.
As mentioned above, banking stocks also saw notable weakness on the day, resulting in a 3.8 percent loss by the Kbw Bank Index. Real estate, steel, and railroad stocks also turned in some of the market's worst performances.
At the other end of the spectrum, airline and defense stocks bucked the downtrend, helping to limit the downside for the markets. The Philadelphia Defense Index closed up 2.8 percent, while the Amex Airline Index rose 2.7 percent.
Health insurance and wireless stocks also saw some strength, driving the Morgan Stanley Healthcare Payor Index and the Amex Wireless Index up 2.2 percent and 1.4 percent, respectively,
A slim majority of the Dow components ended the day in negative territory, helping to keep the blue chip index in the red. Citigroup (C) and JP Morgan (JPM) turned in two of the worst performances, closing down 4.6 percent and 3.7 percent, respectively.
Construction equipment maker Caterpillar (CAT) also showed a notable decline, ending the session down 2.6 percent. With the loss, the stock pulled back off the one-month closing high that it set on Friday.
Alcoa (AA), DuPont (DD), and Disney (DIS) were among the other Dow components that posted notable losses on the day.
At the other end of the spectrum, General Motors (GM) showed a strong upward move over the course of the session, closing up 8.1 percent. Notable advances by General Electric (GE) and United Technologies (UTX) also helped to lift the Dow well off its worst level of the day.
In overseas trading, stock markets across the Asia-Pacific region closed higher on Monday, shrugging off news of a rocket launch by North Korea on Sunday. Japan's benchmark Nikkei 225 Index ended the day up 1.2 percent.
Meanwhile, the major European markets ended the session lower. The U.K.'s FTSE 100 Index closed down 0.9 percent, while the French CAC 40 Index and the German DAX Index ended the session with losses of 1 percent and 0.8 percent, respectively.
In the bond market, treasuries ultimately closed moderately lower after seeing significant uncertainty throughout the session. Subsequently, the yield on the benchmark ten-year note ended the session up 3.4 basis points at 2.941 percent.
Corporate news takes center stage on Tuesday. Before the bell, Pier 1 Imports (PIR) is expected to report quarterly earnings, while Alcoa (AA) highlights the reports after the market close. The release of results from Alcoa is seen as the unofficial start of earnings season.
The economic calendar is light again on Tuesday, with a consumer credit report at 3 p.m. the only notable data.
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