RTTNews - Stocks are continuing to tread on the downside in early afternoon trading on Tuesday after showing a notable pullback earlier in the session. The major averages opened notably lower, as some traders pulled capital out of stocks following an influx of uninspiring economic data.

Before the start of trading, Automatic Data Processing, Inc. (ADP) released a report showing that private sector employment experienced another notable decline in the month of May, with the decrease in jobs slightly exceeding economist estimates.

Meanwhile, service sector activity contracted at a slightly slower rate in the month of May, according to a report released by the Institute for Supply Management, although the index of activity in the sector increased by less than economists had expected.

In a separate report, the Commerce Department released data showing a notable increase in factory orders in the month of April, but the increase came after a substantial decline in the previous month and came in slightly below economist estimates.

The major averages have moved roughly sideways in recent trading, stuck firmly in negative territory. The Dow is currently down 95.02 at 8,645.85, the Nasdaq is down 16.37 at 1,820.43 and the S&P 500 is down 13.77 at 930.97.

Sector News

Weakness in resources has continued in afternoon trading, with oil stocks slipping considerably on the session. Subsequently, the Amex Oil Index is down by 4.1 percent on the day, moving further off of the nearly five-month closing high it set on Monday.

Valero Energy (VLO) is helping to lead the oil sector lower, with the oil refinery operator currently down 17.2 percent. With the loss, shares of Valero have fallen to a two-month intraday low.

The loss by Valero comes after the company announced it expects a net loss of $0.50 per share for the second quarter. In addition, the company said it would issue an additional 40 million shares of common stock, prompting concern over share dilution.

Steel stocks are also deepening their losses, as reflected by the 6.4 percent pullback being shown by the Amex Steel Index. With the retreat, the index is continuing its pullback from the eight-month high set in the previous session.

Further weakness has also emerged among gold stocks, with the Amex Gold Bugs Index slipping by 5.3 percent. The retreat comes as the price of gold is down by $16.50 an ounce on the NYMEX.

Housing, chemical, and semiconductor stocks also continue to post notable losses. The weakness among housing stocks comes as traders react to quarterly losses from Toll Brothers (TOL) and Hovnanian (HOV) as well as a report showing a steep drop in mortgage applications

Meanwhile, biotechnology stocks are among the few gainers on the day, with the Amex Biotechnology Index surging by 4 percent on the day.

Stocks in the News

Despite the broad based losses visible in the equity markets on the day, some firms are rallying following favorable court rulings.

Shares of TiVO (TIVO) are skyrocketing in afternoon trading after the U.S. District Court in the Eastern District of Texas ruled in favor of the firm in a patent lawsuit against EchoStar Communications (SATS). TiVo's stock is soaring, climbing by 46.8 percent on the session, reaching its best level in over eight years.

Tessera Technologies (TSRA) is also seeing notable upside after winning a crucial patent verdict in its favor. The U.S. International Trade Commission found the company's patents had been violated by a number of semiconductor companies. Shares of Tessera are up by 6.6 percent on the day, rising to their best level in over 15 months.

On the other hand, Aetna (AET) is under pressure after lowering its 2009 operating earnings guidance to a range of $3.55 to $3.70 per share from its prior guidance of $3.85 to $3.95 per share. Wall Street analysts expect the company to earn $3.80 per share for the full year.

Aetna has dipped by 5.2 percent following the news, falling to its worst intra-day level in nearly a month earlier in the session.

In Focus: Economic Data, Bernanke, Corporate News

As mentioned above, the day's trading has largely been driven by a series of economic reports released earlier in the day.

The ISM said its index of activity in the service sector rose to 44.0 in May from 43.7 in April, although a reading below 50 indicates a continued contraction in the sector. Economists had been expecting a somewhat more notable increase to a reading of 45.0.

Meanwhile, a report from the Commerce Department showed that orders for manufactured goods rose 0.7 percent in April following a revised 1.9 percent drop in March. Economists had expected orders to increase by 0.9 percent compared to the 0.9 percent decrease originally reported for the previous month.

Private payroll processor ADP said non-farm private employment fell by 532,000 jobs in May following a revised decrease of 545,000 jobs in April. Economists had expected a decrease of about 525,000 jobs compared to the decline of 491,000 jobs originally reported for the previous month.

In other news, Federal Reserve Chairman Ben Bernanke told the House Budget Committee Wednesday that the economic contraction may be slowing, although he said there will likely be a significant increase in job losses and unemployment in the next few months.

Bernanke also warned of the potentially dire consequences of allowing the deficit to remain high and called on Congress to consider long-term steps for fiscal balance.

On the corporate front, NetApp (NTAP) said it has made a revised proposal to acquire Data Domain (DDUP). As per the terms of the proposal, NetApp will acquire all outstanding shares of Data Domain common stock for $30 per share in cash and stock in a transaction valued at approximately $1.9 billion.

Shares of Data Domain are currently up by 3 percent on the day after reaching their best intraday level in over 18 months earlier in the session.

Meanwhile, Toll Brothers reported a second quarter net loss of $83.17 million or $0.52 per share, compared to a net loss of $93.74 million or $0.59 per share last year. Excluding write-downs, the loss was $5.2 million, or $0.03 per share. Wall Street analysts expected a loss of $0.44 per share.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region finished modestly higher on Wednesday. Japan's benchmark Nikkei 225 Index rose by 0.4 percent, while Hong Kong's Hang Seng climbed by 1 percent.

Meanwhile, the major European markets all closed notably lower. The U.K.'s FTSE 100 Index fell by 2.1 percent, while the French CAC 40 Index and the German DAX Index closed down by 2.0 percent and 1.7 percent, respectively.

In the bond markets, treasuries are holding onto strong gains, hovering near their best levels of the day. Subsequently, the yield on the benchmark ten-year note is down to 3.561 percent, a drop of 8.3 basis points on the day.

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