Stocks Extending Sharp Pullback Seen Late Last Week - U.S. Commentary

(RTTNews) - After initially showing a lack of direction, stocks have moved notably lower over the course of the trading day on Monday. The drop on the day extends the downward move seen last week, which the worst for the markets since 2012.

The major averages have seen some further downside in recent trading, hitting new lows for the session. The Dow is down 67.17 points or 0.4 percent at 15,811.94, the Nasdaq is down 67.59 points or 1.6 percent at 4,060.59 and the S&P 500 is down 14.28 points or 0.8 percent at 1,776.01.

The continued weakness on Wall Street reflects lingering concerns about emerging markets as well as the likelihood of further tapering by the Federal Reserve.

The Fed is holding a two-day monetary policy meeting beginning on Tuesday, and traders will be closely watching any comments regarding the outlook for its asset purchase program following December's decision to begin tapering.

A report from the Commerce Department showing a much steeper than expected drop in new home sales in December may also be weighing on the markets.

The report said new home sales tumbled 7.0 percent to an annual rate of 414,000 in December from the revised November rate of 445,000. Economists had expected sales to dip to 455,000 from the 464,000 originally reported for the previous month.

With the steep drop, new home sales pulled back further off the rate of 463,000 seen in October, which was the highest since July of 2008.

Among individual stocks, shares of Regis (RGS) have fallen sharply after the parent of Supercuts reported an unexpected second quarter loss. Regis is down by 9.6 percent after hitting its worst intraday level in almost five years.

Online search giant Google (GOOG) is also posting a notable loss after continuing its buying spree with the acquisition of artificial intelligence company DeepMind for a reported $400 million.

On the other hand, Caterpillar (CAT) is turning in a strong performance after the construction equipment maker reported better than expected fourth quarter results and provided upbeat guidance for 2014. The company also said its board has approved a new $10 billion stock repurchase program.

Sector News

Biotechnology stocks are seeing substantial weakness in mid-day trading, resulting in a 3.7 percent drop by the NYSE Arca Biotechnology Index. With the loss, the index is pulling back further off the record closing high that it set last Tuesday.

InterMune (ITMN), Pharmacyclics (PCYC), and Exact Sciences (EXAS) are turning in some of the biotech sector's worst performances.

Significant weakness has also emerged among airline stocks, as reflected by the 2.9 percent loss being posted by the NYSE Arca Airline Index. The index continues to pull back from last Wednesday's eleven-year closing high.

Brokerage stocks have also come under considerable selling pressure, dragging the NYSE Arca Broker/Dealer Index down by 2.7 percent. With the drop, the index continues to pull back off the five-year closing high that it set last Wednesday.

Tobacco, gold, and housing stocks are also seeing notable weakness 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 came under pressure during trading on Monday. Japan's Nikkei 225 Index plunged by 2.5 percent, while Hong Kong's Hang Seng Index tumbled by 2.1 percent.

The major European markets also moved to the downside on the day. While the U.K.'s FTSE 100 Index dropped by 1.7 percent, the German DAX Index and the French CAC 40 Index fell by 0.5 percent and 0.4 percent, respectively.

In the bond market, treasuries continue to show a lack of direction following recent strength. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, is down by less than a basis point at 2.2728 percent.