Stocks Fall Sharply On Retail Earnings, Plosser Comments - U.S. Commentary

(RTTNews) - After moving modestly lower in early trading, stocks saw some further downside over the course of the trading day on Tuesday. The pullback on the day partly offset the upward move seen over the two previous sessions.

The major averages climbed off their worst levels in late-day trading but remained firmly in the red. The Dow tumbled 137.55 points or 0.8 percent to 16,374.31, the Nasdaq fell 28.92 points or 0.7 percent to 4,096.89 and the S&P 500 slid 12.25 points or 0.7 percent to 1,872.83.

The early weakness on Wall Street partly reflected disappointing quarterly results from retailers such as Staples (SPLS), Dick's Sporting Goods (DKS), and Home Depot (HD).

Staples and Dick's posted steep losses on the day after reporting weaker than expected first quarter earnings and providing disappointing guidance.

On the other hand, shares of Home Depot moved to the upside even though the home improvement retailer reported first quarter earnings and sales that came in below analyst estimates.

Selling pressure intensified in afternoon trading due in part to remarks by Philadelphia Federal Reserve President Charles Plosser.

In a speech in Washington, Plosser said the Fed may be required to begin raising interest rates sooner rather than later as inflation moves closer to the 2 percent target and the labor market improves.

Plosser also said scaling back the Fed's asset purchases at the current pace of $10 billion per meeting may leave the central bank behind the curve if the economy continues to play out according to forecasts.

"Over the past five years, the Fed and, dare I say, many other central banks have become much more interventionist," Plosser said. "I do not think this is a particularly healthy state of affairs for central banks or our economies."

He added, "With a growing economy and the Fed's long-term asset purchases coming to an end, now is the time to contemplate restoring some semblance of normalcy to monetary policy."

Meanwhile, in separate remarks, New York Fed President William Dudley predicted that the pace of eventual interest rate increases will be relatively slow. Sector News

Steel stocks showed a substantial move to the downside over the course of the trading day. Reflecting the weakness in the sector, the NYSE Arca Steel Index dropped by 1.8 percent.

Olympic Steel (ZEUS) and U.S. Steel (X) turned in two of the sector's worst performances, falling by 4.8 percent and 4.4 percent, respectively.

Considerable weakness also emerged among biotechnology stocks, as reflected by the 1.8 percent loss posted by the NYSE Arca Biotechnology Index. Immunogen (IMGN) and InterMune (ITMN) posted steep losses on the day.

Airline stocks also came under pressure, dragging the NYSE Arca Airline Index down by 1.5 percent. Republic Airways (RJET) helped to lead the sector lower, tumbling by 3.7 percent.

Electronic storage, defense, and brokerage stocks also saw notable weakness, moving lower along with most of the other major sectors.

Other Markets

In overseas trading, the major stock markets across the Asia-Pacific region moved mostly higher during trading on Tuesday. Japan's Nikkei 225 Index rose by 0.5 percent, while Hong Kong's Hang Seng Index advanced by 0.6 percent.

Meanwhile, the major European markets all moved to the downside on the day. While the U.K.'s FTSE 100 Index fell by 0.6 percent, the French CAC 40 Index and the German DAX Index dipped by 0.4 percent and 0.2 percent, respectively.

In the bond market, treasuries moved moderately higher over the course of the session after initially showing a lack of direction. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, fell by 2.7 basis points to 2.509 percent.

Looking Ahead

Trading on Wednesday could be impacted by reaction to the minutes of the Fed's latest monetary policy meeting, which may shed some additional light on the outlook for monetary policy.

Ahead of the release of the minutes, traders will also hear remarks by Fed Chair Janet Yellen, Kansas City Fed President Esther George and Minneapolis Fed President Narayana Kocherlakota.

On the earnings front, Lowe's (LOW) and Target (TGT) are among the companies due to report their quarterly results before the start of trading on Wednesday.