Stocks Extend Sell-Off After Erasing Early Gains - U.S. Commentary

(RTTNews) - After moving sharply higher at the start of trading on Tuesday, stocks erased the early gains over the course of the session before closing notably lower. The pullback on the day extended the sell-off seen in recent sessions.

The major averages ended the session near their worst levels of the day. The Dow tumbled 204.91 points or 1.3 percent to 15,666.44, the Nasdaq fell 19.76 points or 0.4 percent to 4,506.49 and the S&P 500 slid 25.59 points or 1.4 percent to 1,867.62.

With the downturn on the day, the Dow fell to its lowest closing level since February of last year, while the Nasdaq and the S&P 500 set new ten-month closing lows.

The initial strength on Wall Street was partly due to bargain hunting, with traders picking up stocks at reduced levels on the heels of the steep drop seen in recent days.

Buying interest waned not long after the open, however, and selling pressure subsequently emerged amid continued concerns about developing economies and the outlook for U.S. interest rates.

Meanwhile, traders largely shrugged off news that the People's Bank of China lowered interest rates for the fifth time in nine months.

The Chinese central bank said it would reduce the one-year lending rate to 4.6 percent in an effort to provide long-term liquidity and help support the economy.

On the U.S. economic front, the Commerce Department released a report showing a notable rebound in new home sales in the month of July.

The report said new home sales jumped to an annual rate of 507,000 in July, 5.4 percent above the revised June rate of 481,000.

Economists had expected new home sales to climb to a rate of 516,000 from the 482,000 originally reported for the previous month.

A separate report from the Conference Board showed a substantial improvement in consumer confidence in the month of August.

The Conference Board said its consumer confidence index jumped to 101.5 in August from 91.0 in July. The index had been expected to show a more modest increase to a reading of 94.0.

Sector News

Gold stocks saw substantial weakness throughout the session, resulting in a 4.3 percent loss by the NYSE Arca Gold Bugs Index. With the drop, the index pulled back further off the one-month closing high set last Thursday.

The weakness among gold stocks came amid a decrease by the price of the precious metal, with gold for December delivery falling $15.30 to $1,138.30 an ounce.

Significant weakness also emerged among housing stocks, as reflected by the 3 percent loss posted by the Philadelphia Housing Sector Index. The decrease pulled the index down to its lowest closing level in well over three months.

Utilities, railroad, commercial real estate, and natural gas stocks also came under pressure on the day, moving lower along with most of the other major sectors.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region turned in a mixed performance during trading on Tuesday. Japan's Nikkei 225 Index tumbled by 4 percent, while Hong Kong's Hang Seng Index advanced by 0.7 percent.

Meanwhile, the major European markets all moved sharply higher on the day. While the U.K.'s FTSE 100 Index jumped by 3.1 percent, the French CAC 40 Index surged up by 4.1 percent and the German DAX Index soared by 5 percent.

In the bond market, treasuries pulled back sharply after seeing significant strength in recent days. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, shot up by 13.6 basis points to 2.133 percent.

Looking Ahead

Trading on Wednesday may be impacted by reaction to the Commerce Department's report on durable goods orders in the month of July.