RTTNews - Stocks have moved firmly into negative territory in afternoon trading on Wednesday after seeing notable strength earlier in the session. The major averages deepened their losses after an auction of ten-year notes added to recent concerns regarding climbing interest rates.
The Treasury Department's auction of $19.0 billion worth of ten-year notes drew a higher than expected yield of 3.99 percent, raising concerns about the outlook for interest rates. At the same time, the bid-to-cover ratio, an indicator of demand, rose to 2.62 from 2.47 during the previous ten-year note auction in May.
The bond market has been in focus recently, as rising interest rates despite the Federal Reserve's pledge to keep rates low through quantitative easing have raised some concern.
Traders are also digesting the Federal Reserve's comments in the Beige Book, which indicated that conditions remained weak or deteriorated further during the period from mid-April through May. However, five of the twelve Fed districts noted a moderation in the downward trend, mitigating some market pessimism.
While the Beige Book also said that contacts from several Fed districts indicated an improvement in their expectations, they do not see a substantial increase in economic activity through the end of the year.
The major indices have moved off of their lows, but they currently remain entrenched firmly in negative territory. The Dow is currently down 77.85 at 8,685.21, the Nasdaq is down 21.43 at 1,838.70 and the S&P 500 is down 9.44 at 932.99.
Most of the Dow components are trading in negative territory, contributing to the notable pullback by the blue chip index.
One of the Dow's worst performers is Cisco (CSCO), which has fallen by 1.9 percent on the day. The stock has seen notable volatility on the day, reaching its best intra-day level in eight months earlier in the session before pulling back sharply in recent trading.
Additionally, shares of Caterpillar (CAT) and General Electric (GE) are also showing notable declines, falling by 2.1 percent and 2 percent on the day. Further weakness has emerged in shares of Coca-Cola (KO), JP Morgan (JPM) and Kraft Foods (KFT).
Bucking the day's downtrend are shares of Alcoa (AA), which are up by 2.3 percent. The stock is extending a recent upward move and climbing to its best level in over five months.
Most of the major sectors are in the red, contributing to the considerable losses being shown by the major averages in mid-afternoon trading.
Real estate stocks are showing notable losses, with the Morgan Stanley Real Estate Index falling by 3.3 percent on the day, reaching its worst intraday level in two weeks.
The sector is being hurt by shares of LaSalle Hotel Properties (LHO), which have dropped by 11 percent. With the retreat, the stock continues to pull back from an eight-month high set early last week. The decline comes after the firm announced that it has priced a public offering of 10 million common shares at $14.75 per share, sparking concern over share dilution.
Significant weakness is also visible among electronic storage stocks, as reflected by the 2.3 percent pullback by the Amex Disk Drive Index. With the decline the index is pulling back off the eight-month high set in the previous session.
Airline, brokerage, railroad, and biotechnology stocks are also posting steep losses. The weakness visible in the variety of sectors reflects the broad-based pullback seen in equities on the session.
On the other hand, utilities, natural gas and oil service stocks are posting modest gains on the day. Natural gas and oil stocks have been helped by an increase in commodity prices.
In Focus: Economic Data, Corporate News
On the economic front, traders are digesting a report from the Commerce Department showing that the U.S. trade deficit for the month of April came in modestly wider than in March, as the value of exports fell by more than the value of imports.
The report showed that the trade deficit widened to $29.2 billion in April from a revised $28.5 billion in March. Economists had expected the deficit to widen to $29.0 billion from the $27.6 billion originally reported for the previous month.
In other news, the Supreme Court has allowed the sale of Chrysler's assets to Italian automaker Fiat to move forward. In lifting a stay on the sale, the high court rejected a move by a group of plaintiffs, including three Indiana public pension organizations, to block the sale.
Both companies and the White House had warned that further delays by the Supreme Court could have led to Fiat's withdrawal from the deal.
Meanwhile, the House Oversight and Government Reform Committee said they've subpoenaed the Federal Reserve for documents, including e-mails to and from Fed Chairman Ben Bernanke, to explore the genesis of Bank of America's December purchase of Merrill Lynch.
On Thursday, the Committee will host Ken Lewis, former Chief Executive Officer of Bank of America, as part of a growing investigation into whether government officials pressured the bank to withhold details about the deal from investors despite ballooning losses at the brokerage firm.
In overseas trading, stock markets across the Asia-Pacific region ended Wednesday's session notably higher. Japan's benchmark Nikkei 225 Index rose by 2.1 percent, while Hong Kong's Hang Seng closed up by 4.0 percent.
The major European markets also closed moderately higher. The U.K.'s FTSE 100 Index closed up by 0.7 percent, while the French CAC 40 Index and the German DAX Index finished up by 0.6 percent and 1.1 percent, respectively.
In the bond markets, treasuries are plunging. Subsequently, the yield on the benchmark ten-year note is up to 3.976 percent, a climb of 11.8 basis points on the day.
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