Stocks Seeing Further Downside Following Initial Weakness - U.S. Commentary

(RTTNews) - After coming under pressure in early trading on Wednesday, stocks have seen further downside over the course of the trading session. With the drop on the day, the Dow is poised to end the session at a new six-month closing low.

The major averages have climbed off their worst levels in recent trading but remain firmly in the red. The Dow is down 200.72 points or 1.2 percent at 17,310.62, the Nasdaq is down 59.19 points or 1.2 percent at 5,000.16 and the S&P 500 is down 23.01 points or 1.1 percent at 2,073.91.

The sell-off on Wall Street partly reflects trepidation ahead of the release of the minutes of the Federal Reserve's latest monetary policy meeting this afternoon.

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.

However, it is worth noting that the minutes contain a slew of information that could be used by those on either side of the interest rate debate to support their argument.

Traders are also expressing concerns about recent volatility in the Chinese stock market, as the Shanghai Composite Index ended the day up by 1.2 percent after falling more than 5 percent.

Meanwhile, the Labor Department released a report before the start of trading showing that U.S. consumer prices rose by slightly less than expected in July.

The Labor Department said its consumer price index edged up by 0.1 percent in July after climbing by 0.3 percent in June. Economists had expected prices to rise by 0.2 percent.

Excluding food and energy prices, the core consumer price index also ticked up by 0.1 percent in July following a 0.2 percent increase in June. Core prices were also expected to rise by 0.2 percent.

Among individual stocks, shares of American Eagle Outfitters (AEO) have moved sharply lower on the day after the apparel retailer forecast a slowdown in the pace of sales growth in the current quarter.

Office supplies retailer Staples (SPLS) has also come under pressure after reporting second quarter earnings that met analyst estimates but provided disappointing guidance

On the other hand, shares of Dot Hill (HILL) have spiked higher after the data storage systems maker agreed to be acquired by Seagate Technology (STX) for $9.75 per share or a total of $694 million.

Sector News

A sell-off by energy stocks is contributing to the weakness being shown by the broader markets, with a steep drop by the price of crude oil weighing on the sector. Crude for September delivery is currently tumbling $1.79 to $40.83 a barrel.

The sharp pullback by the price of crude oil comes after a report from the Energy Information Administration said crude inventories unexpectedly jumped by 2.6 million barrels last week.

Substantial weakness also remains visible among steel stocks, as reflected by the 3.4 percent loss being posted by the NYSE Arca Steel Index. With the drop, the index has fallen to a six-year intraday low.

Computer hardware stocks have also come under considerable selling pressure, dragging the NYSE Arca Computer Hardware Index down by 1.5 percent. The index is on pace to end the session at its worst closing level in well over a year.

Biotechnology, chemical, and airline stocks are also seeing significant weakness, while gold stocks are among the few groups bucking the downtrend amid an increase by the price of the precious metal.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region turned in a mixed performance during trading on Wednesday. Japan's Nikkei 225 Index tumbled by 1.6 percent, while Australia's All Ordinaries Index jumped by 1.3 percent.

Meanwhile, the major European markets all came under pressure on the day. While the German DAX Index plummeted by 2.1 percent, the U.K.'s FTSE 100 Index and the French CAC 40 Index plunged by 1.9 percent and 1.8 percent, respectively.

In the bond market, treasuries have turned higher on the day amid the sell-off on Wall Street. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, is down by 3.2 basis points at 2.164 percent.