Stocks Give Back Ground Following Yesterday's Rally - U.S. Commentary

(RTTNews) - After coming under pressure early in the session, stocks saw some further downside over the course of the trading day on Tuesday. The losses on the day partly offset the strong upward move that was seen in the previous session.

The major averages ended the session near their worst levels of the day. The Dow tumbled 200.19 points or 1.1 percent to 17,776.12, the Nasdaq slid 46.56 points or 0.9 percent to 4,900.88 and the S&P 500 dropped 18.35 points or 0.9 percent to 2,067.89.

The weakness on Wall Street was partly due to profit taking following yesterday's rally, with stocks extending the volatility seen in recent weeks.

Renewed worries about the outlook for interest rates may also have weighed on the markets following remarks by Richmond Federal Reserve Bank President Jeffrey Lacker.

In a speech to the Greater Richmond Chamber of Commerce, Lacker said he believes a strong case can be made for an increase in interest rates relatively soon.

Lacker said the Fed's June meeting will likely be an appropriate time to raise rates, arguing that recent signs of economic weakness are transitory and due to the rough winter weather.

While Lacker is widely viewed as the one of the most hawkish Fed officials, his comments have offset some of the recent dovish signs from the Fed.

Traders were also digesting a mixed batch of economic data, including a report from MNI Indicators showing that Chicago business activity unexpectedly continued to contract in March.

MNI Indicators said its Chicago business barometer edged up to 46.3 in March from 45.8 in February, although a reading below 50 continues to indicate a contraction.

Economists had expected the business barometer to show a more significant rebound to a reading of 51.5, which would have indicated modest growth.

Meanwhile, the Conference Board released a separate report showing an unexpected rebound in consumer confidence in the month of March.

The Conference Board said its consumer confidence index jumped to 101.3 in March from an upwardly revised 98.8 in February.

The increase came as a surprise to economists, who had expected the index to edge down to 95.5 from the 96.4 originally reported for the previous month.

Sector News

Following the broad based strength seen in the previous session, most of the major sectors moved back to the downside on the day.

Biotechnology stocks posted particularly steep losses, dragging the NYSE Arca Biotechnology Index down by 2.1 percent. Exact Sciences (EXAS) and Celgene (CELG) turned in two of the biotech sector's worst performances.

Significant weakness also emerged among gold stocks, as reflected by the 1.7 percent loss posted by the NYSE Arca Gold Bugs Index. The weakness in the gold sector came as gold for June delivery dipped $2.10 to $1,183.20 an ounce.

Computer hardware stocks also came under pressure on the day, dragging the NYSE Arca Computer Hardware Index down by 1.6 percent to a five-month moving closing low. Pharmaceutical, steel, and railroad stocks also saw notable weakness.

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 slumped by 1.1 percent, while Hong Kong's Hang Seng Index edged up by 0.2 percent.

Meanwhile, the major European markets all moved notably lower on the day. While the U.K.'s FTSE 100 Index plummeted by 1.7 percent, the German DAX Index and the French CAC 40 Index both tumbled by 1 percent.

In the bond market, treasuries moved back to the upside after ending the previous session slightly lower. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, dropped by 2.9 basis points to 1.934 percent.

Looking Ahead

Another batch of economic data is scheduled to be released on Wednesday, with reports on private sector employment and national manufacturing activity likely to be in focus.