Losses By AIG, Twitter Contribute To Weakness On Wall Street - U.S. Commentary

(RTTNews) - After coming under pressure in early trading on Tuesday, stocks saw further downside over the course of the trading session. The major averages slid firmly into negative territory, more than offsetting the modest gains posted in the previous session.

The Dow fell 129.53 points or 0.8 percent to 16,401.02, pulling back further off the record closing high that it set last Wednesday. The tech-heavy Nasdaq tumbled 57.30 points or 1.4 percent to 4,080.76, while the S&P 500 dropped 16.94 points or 0.9 percent to 1,867.72.

A negative reaction to quarterly results from American International Group (AIG) contributed to the weakness on Wall Street, with the insurer falling by 4.1 percent.

After the close of trading on Monday, AIG reported a steep drop in first quarter net income, reflecting higher catastrophe losses at its property and casualty unit as well as lower earned premiums.

Additionally, a sharp drop by shares of Twitter (TWTR) weighed on the tech sector. The social media giant plunged by 17.8 percent following the expiration of a six-month lock-up period that prevented insiders from selling shares of the company's stock.

The weakness on Wall Street also reflected lingering concerns about the crisis in Ukraine amid reports of continued clashes between Ukrainian armed forces and pro-Russian militants.

The latest reports from the region indicated that more than 30 people have been killed as Ukrainian troops attempt to retake an occupied city in the eastern part of the country.

Meanwhile, traders largely shrugged off a report from the Commerce Department showing that the U.S. trade deficit narrowed in the month of March.

The Commerce Department said the trade deficit narrowed to $40.4 billion in March from a revised $41.9 billion in February. Economists had been expecting a deficit of about $40.5 billion.

The narrower deficit came as the value of exports surged up by 2.1 percent, outpacing the 1.1 percent increase in the value of imports.

While the rebound in exports provides further evidence of an economic recovery following the winter doldrums, the increase in imports may lead to a downward revision to the already anemic first quarter GDP growth.

Sector News

Internet stocks showed a substantial move to the downside on the day, dragging the Dow Jones Internet Composite Index down by 3 percent. With the loss, the index pulled back toward the six-month closing low that it set last week.

While Twitter helped to lead the sector lower, Netflix (NFLX), Facebook (FB), and Amazon (AMZN) also posted steep losses.

Significant weakness also emerged among brokerage stocks, as reflected by the 2.1 percent loss posted by the NYSE Arca Broker/Dealer Index. FXCM Inc. (FXCM) and E*Trade (ETFC) turned in two of the sector's worst performances.

Housing stocks also came under considerable selling pressure, resulting in a 1.7 percent drop by the Philadelphia Housing Sector Index. The index pulled back further off the nearly one-month closing high that it set last Friday.

Retail, computer hardware, banking, and biotech stocks also saw notable weakness, moving lower along with most of the other major sectors.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved mostly higher on Tuesday, although the markets in Japan and Hong Kong were closed for holidays. Australia's All Ordinaries Index rose by 0.4 percent, while China's Shanghai Composite Index closed just above the unchanged line.

Meanwhile, the major European markets came under pressure on the day. While the U.K.'s FTSE 100 Index fell by 0.4 percent, the German DAX Index and French CAC 40 Index dropped by 0.7 percent and 0.8 percent, respectively.

In the bond market, treasuries moved modestly higher, nearly offsetting the pullback seen in the previous session. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, fell by 1.6 basis points at 2.595 percent.

Looking Ahead

While a report on labor productivity and costs may attract some attention on Wednesday, traders are likely to focus on remarks by Federal Reserve Chair Janet Yellen, who is due to testify before the Joint Economic Committee of Congress.

Trading could also be impacted by reaction to earnings news from Disney (DIS), as the entertainment giant is releasing its fiscal second quarter result after the close of today's trading.