Interest Rate Worries Lead To Sell-Off On Wall Street - U.S. Commentary

(RTTNews) - Following the mixed performance seen last week, stocks moved sharply lower over the course of the trading day on Tuesday. The Dow continued to pull back off the record closing high it set a week ago, while the S&P 500 pulled back further off the record closing high it set last Thursday.

The major averages climbed off their worst levels going into the close but remained firmly negative. The Dow tumbled 190.48 points or 1 percent to 18,041.54, the Nasdaq plummeted 56.61 points or 1.1 percent to 5,032.75 and the S&P 500 slumped 21.86 points or 1 percent to 2,104.20.

The sell-off on Wall Street came following the release of a batch of largely upbeat U.S. economic data, which led to concerns about the outlook for interest rates.

The Commerce Department released a report this morning showing a bigger than expected rebound in new home sales in the month of April.

The report said new home sales climbed 6.8 percent to an annual rate of 517,000 in April from the revised March rate of 484,000. Economists had expected new home sales to rise to a rate of 509,000.

A separate Commerce Department report showed a modest drop in durable goods orders in April, although the decrease largely reflected a pullback in the volatile transportation sector.

Orders excluding transportation rose by more than expected, and the report also showed a continued increase by a key reading on capital spending.

Additionally, the Conference Board released a report showing an unexpected uptick in consumer confidence in the month of May.

The data led to worries that an interest rate hike could still be on the table at the next Federal Reserve meeting in a few weeks.

In remarks in Israel on Monday, Fed Vice Chairman Stanley Fischer stressed that monetary policy would be driven by data and not the date.

Sector News

Most of the major sectors moved to the downside on the day, reflecting broad based selling pressure on Wall Street.

Gold stocks posted particularly steep losses, dragging the NYSE Arca Gold Bugs Index down by 3.7 percent. The steep drop pulled the index down to its lowest closing level in almost two months.

The weakness among gold stocks came amid a notable decrease by the price of the precious metal, as gold for June delivery fell $17.10 to $1,186.90 an ounce.

Significant weakness was also visible among oil service stocks, which moved lower along with the price of crude oil. With crude for July delivery tumbling $1.69 to $58.03 a barrel, the Philadelphia Oil Service Index dropped by 2.7 percent.

Airline stocks also saw considerable weakness, as reflected by the 2.4 percent loss posted by the NYSE Arca Airline Index. The decrease extended a recent pullback by the index, which fell to a five-month closing low.

Steel, natural gas, computer hardware, railroad and trucking stocks also showed notable moves to the downside on the day.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved mostly higher during trading on Tuesday. Japan's Nikkei 225 Index inched up by 0.1 percent, while Hong Kong's Hang Seng Index advanced by 0.9 percent.

Meanwhile, the major European markets all came under pressure on the day. While the French CAC 40 Index dropped by 0.7 percent, the U.K.'s FTSE 100 Index slumped by 1.2 percent and the German DAX Index tumbled by 1.6 percent.

In the bond market, treasuries moved notably higher despite the slew of upbeat economic data. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, tumbled by 7.8 basis points to 2.137 percent.

Looking Ahead

Following the slew of economic data released this morning, the economic calendar for Wednesday is relatively quiet, potentially leading to choppy trading.