Stocks Regain Ground After Early Move To The Downside - U.S. Commentary

(RTTNews) - While stocks moved mostly lower in early trading on Tuesday, selling pressure has waned over the course of the session. The major averages have subsequently climbed well off their worst levels of the day but remain in the red.

Currently, the major averages are posting modest losses on the day. The Dow is down 11.78 points or 0.1 percent at 16,931.32, the Nasdaq is down 6.13 points or 0.1 percent at 4,330.11 and the S&P 500 is down 2.93 points or 0.2 percent at 1,948.34.

The early weakness on Wall Street was partly due to profit taking, with some traders cashing in on the recent upward trend by the markets.

The Dow and the S&P 500 pulled back off the record closing highs set on Monday, while the Nasdaq gave back ground after ending the previous session at its best levels in three months.

Nonetheless, traders seemed somewhat reluctant to make any significant moves amid a lack of traditionally market-moving catalysts.

News out of China may have helped to limit the downside for the markets, as the Bank of China lowered the reserve requirement for banks advancing loans to the rural sector and small businesses by 50 basis points.

Peter Boockvar, managing director at the Lindsey Group, said, "This move follows other fiscal steps over the past month that has helped the rail industry, some easing of housing restrictions and tax incentives for small business."

"China is doing their best to balance the need to controllably deflate its property bubble without taking down the whole economy," he added.

Additionally, the Commerce Department released a report showing a much bigger than expected increase in wholesale inventories in April

The report said wholesale inventories surged up by 1.1 percent in April, matching the increase seen in the previous month. Economists had expected inventories to increase by about 0.5 percent.

Boockvar noted that the inventories data may raise second quarter GDP estimates by one to two tenths if confirmed by the overall business inventories report due to be released on Thursday.

Sector News

Most of the major sectors are showing only modest moves in mid-day trading, contributing to the lackluster performance by the broader markets.

Brokerage stocks continue to see notable weakness, however, with the NYSE Arca Broker/Dealer Index falling by 1.1 percent. The loss by the index comes after it ended the previous session at a two-month closing high.

Investment Technology Group (ITG) and LPL Financial (LPLA) are turning in two of the brokerage sector's worst performances.

Commercial real estate, airline, and computer hardware stocks are also seeing some weakness on the day, although selling pressure has waned from earlier in the session.

Meanwhile, gold stocks have shown a strong move to the upside, moving higher along with the price of the precious metal. With gold for August delivery climbing $7.10 to $1,253.90 an ounce, the NYSE Arca Gold Bugs Index is up by 1.3 percent.

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 fell by 0.9 percent, while Hong Kong's Hang Seng Index advanced by 0.9 percent.

The major European markets also ended the day mixed. While the U.K.'s FTSE 100 Index closed just below the unchanged line, the French CAC 40 Index and the German DAX Index edged up by 0.1 percent and 0.2 percent, respectively.

In the bond market, treasuries are extending a recent downward trend with a moderate move to the downside. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, is up by 2.5 basis points at 2.638 percent.