Stocks Give Back Ground On Disappointing Wal-Mart Earnings - U.S. Commentary

(RTTNews) - Stocks moved mostly lower over the course of the trading day on Tuesday, partly offsetting the upward move seen in the previous session. Selling pressure was relatively subdued, however, limiting the downside for the markets.

The major averages finished the session in the red but off their worst levels of the day. The Dow edged down 33.84 points or 0.2 percent to 17,511.34, the Nasdaq slid 32.35 points or 0.6 percent to 5,059.35 and the S&P 500 dipped 5.52 points or 0.3 percent to 2,096.92.

The weakness on Wall Street partly reflected a negative reaction to earnings news from Wal-Mart (WMT), with the retail giant falling by 3.4 percent on the day.

The drop by shares of Wal-Mart came after the company reported weaker than expected second quarter earnings and lowered its full-year guidance.

Worries about the situation in China also weighed on the markets following a sell-off by stocks in the communist nation.

China's Shanghai Composite Index plunged 6.2 percent on the day amid concerns about economic growth. The steep drop came even as the People's Bank of China set the mid-point of the dollar-yuan exchange rate slightly higher.

Traders were also expressing some trepidation ahead of the release of the minutes of the Federal Reserve's latest monetary policy meeting on Wednesday.

The minutes are likely to be closely analyzed for hints regarding whether the Fed will begin raising interest rates at its next meeting in September.

On the U.S. economic front, the Commerce Department released a report showing that housing starts edged up to a nearly eight-year high in July, although the report also showed a sharp drop in building permits.

The report said housing starts inched up by 0.2 percent to an annual rate of 1.206 million in July from the revised June estimate of 1.204 million.

With the modest increase, housing starts rose to their highest annual rate since reaching 1.264 million in October of 2007.

Meanwhile, the report said building permits, an indicator of future housing demand, plunged 16.3 percent to an annual rate of 1.119 million in July after jumping to an eight-year high of 1.337 million in June.

Sector News

Semiconductor stocks moved sharply lower on the day, dragging the Philadelphia Semiconductor Index down by 2.1 percent. With the drop, the index fell to its lowest closing level in well over nine months.

Considerable weakness was also visible among electronic storage stocks, as reflected by the 1.9 percent loss posted by the NYSE Arca Disk Drive Index. Datalink (DTLK) helped lead the sector lower, falling by 5.3 percent.

After ending the previous session sharply higher, gold stocks also gave back some ground over the course of the trading day. The NYSE Arca Gold Bugs Index fell by 1.6 percent, partly offsetting the 4.1 percent gain posted on Monday.

The pullback by gold stocks came amid a modest decrease by the price of the precious metal, with gold for December delivery slipping $1.50 to $1,116.90 an ounce.

Steel, airline, and networking stocks also saw notable weakness, while housing stocks moved higher on the heels of the upbeat housing starts data.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved mostly lower on Tuesday amid the sell-off in China. Japan's Nikkei 225 Index fell by 0.3 percent, while Hong Kong's Hang Seng Index tumbled by 1.4 percent.

The major European markets also moved to the downside on the day. While the U.K.'s FTSE 100 Index dropped by 0.4 percent, the French CAC 40 Index and the German DAX Index edged down by 0.3 percent and 0.2 percent, respectively.

In the bond market, treasuries came under pressure following the housing data, offsetting the strength seen in the previous session. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, climbed 4.6 basis points to 2.196 percent.

Looking Ahead

Along with the Fed minutes, trading on Wednesday could also be impacted by reaction to the release of a report on consumer price inflation.

Economists expect both the headline consumer price index and the core consumer price index, which excludes food and energy prices, to rise by 0.2 percent in July.

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