RTTNews - After initially moving modestly lower, stocks have seen some further downside over the course of morning trading on Tuesday. The major averages have moved more firmly into negative territory amid another low volume trading day, characteristic of the summer season.

Traders are doing some profit taking, positioning themselves for what is expected to be a dismal earnings season, set to be kicked off by Alcoa (AA) tomorrow. The firm is expected to incur a loss of $0.34 per share on revenues of $3.94 billion for the second quarter. In the prior year period, the company posted earnings of $0.66 per share on revenues of $7.62 billion.

Aside from fresh earnings figures, a series of reports on employment, international trade and consumer sentiment will also help to guide the equity markets later this week.

Today, some traders may focus on the Treasury Department's $35.0 billion auction of three-year notes amid interest rate concerns in the broader markets. The auction will take place at 1 p.m. ET.

Yesterday, an auction of 10-year Treasury Inflation Protect Securities, or TIPS, by the Treasury drew a yield of 1.92 percent and saw strong demand, posting a bid-to-cover ratio of 2.51, its highest in nine years.

The bid-to-cover ratio is a measure of demand that indicates the amount of bids for each dollar worth of securities being sold.

The government has continued its bond selling spree to fund its accelerated stimulus spending. Recently, Vice President Joe Biden confessed that the Obama administration misread the state of the economy, while other members of the administration have not ruled out the possibility of a second stimulus package.

In recent trading, the major averages have moved off their worst levels of the day, although they remain stuck in the red. The Dow is currently down 70.13 at 8,254.74, the Nasdaq is down 13.70 at 1,773.70 and the S&P 500 is down 6.16 at 892.56.

Sector News

Some of the day's weakest performances are being turned in by housing stocks, as reflected by the 2.4 percent decline being shown by the Philadelphia Housing Sector Index. The decline dragged the index down to its worst intraday level in three months earlier in the session.

Notably, KB Home (KBH) is down by 3.1 percent, adding to it recent losses. The stock is now down to its worst level in well over three months.

Resource stocks are also extending their recent weakness, with oil service and natural gas stocks posting notable losses. The Philadelphia Oil Service Index and the NYSE Arca Natural Index are down by 2 percent and 1.7 percent, respectively.

The move in resource stock comes as commodity prices continue to retreat on the NYMEX, with oil for August delivery down $1.16 at $62.89 a barrel. With the loss, the price of oil is moving lower for the fifth consecutive session.

While airline, brokerage, utilities and commercial real estate stocks are also under pressure, strong gains have emerged among healthcare provider and health insurance stocks. The Morgan Stanley Healthcare Payor Index and the Morgan Stanley Healthcare Provider index are up by 4.2 percent and 2.5 percent, respectively, partly offsetting recent losses.

Stocks Driven By Analyst Comments

Astec Industries (ASTE) is dropping in mid-morning trading after being downgraded by Barrington Research from Outperform to Market Perform. The stock is down by 6.6 percent, falling to its worst intraday level in well over two months.

AmSurg (AMSG) is also moving to the downside following a downgrade by Robert W. Baird, which lowered its rating on the stock from Outperform to Neutral. The broker cited a lack of means for the stock's advancement. Shares of AmSurg are down 1.4 percent, pulling back further off a five-month high set in early July.

On the other hand, Trex (TWP) is on the rise after being upgraded by Stifel Nicolaus from Hold to Buy. The stock is up by 5.8 percent, offsetting some recent losses, although it remains in roughly a one month trading range.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region ended Tuesday's session mixed. Japan's benchmark Nikkei 225 Index closed down by 0.3 percent, while South Korea's KOSPI rose 0.4 percent on the day.

The major European markets are also turning in a mixed performance. While the U.K.'s FTSE 100 is up 0.3 percent, the German DAX Index and French CAC 40 Index are down by 0.3 percent and 0.4 percent, respectively.

In the bond markets, treasuries have moved into positive territory amid the pullback on Wall Street. Subsequently, the yield on the benchmark ten-year note is trading at 3.504 percent, a drop of less than a basis point on the day.

For comments and feedback: contact editorial@rttnews.com