Stocks Close Firmly In The Red, Nasdaq Hits Two-Month Low - U.S. Commentary

(RTTNews) - Extending the pullback seen over the two previous sessions, stocks moved sharply lower during trading on Monday. With the losses on the day, the tech-heavy Nasdaq ended the session at its worst closing level in two months.

The major averages all finished the day firmly in negative territory. The Dow slumped 166.84 points or 1 percent to 16,245.87, the Nasdaq tumbled 47.97 points or 1.2 percent to 4,079.75 and the S&P 500 dropped 20.05 points or 1.1 percent to 1,845.04.

The continued weakness on Wall Street came following a pullback in the overseas markets, which were led lower by technology stocks.

Amid a light day on the economic front, traders also continued to cash in on the recent strength in the markets, which lifted the Dow and the S&P 500 to record highs last week.

Traders also seemed to be moving out of riskier assets such as stocks and into safer havens as the markets wait for the quarterly earnings season to get underway.

Aluminum giant Alcoa (AA) is scheduled to release its first quarter results after the close of trading on Tuesday, marking the unofficial start of the earnings season. JP Morgan (JPM) and Wells Fargo (WFC) are also due to report their results later in the week.

Peter Boockvar, chief market analyst at the Lindsey Group, said, "As we embark on the release of Q1 earnings, weather excuses will be widespread and why the guidance will be more relevant."

"For the full year, whether record high profit margins can be sustained will be the key focus, more so than whether top line growth can accelerate," he added.

Among individual stocks, shares of MannKind (MNKD) fell sharply after the biopharmaceutical company said the FDA has extended the review date of its inhaled insulin treatment by three months.

Insurance broker Arthur J. Gallagher (AJG) also came under pressure despite reporting better than expected first quarter earnings. The company also announced a public offering of 19 million shares of its common stock.

Meanwhile, shares of Questcor Pharmaceuticals (QCOR) showed a strong upward move after the drug maker agreed to be acquired by Ireland's Mallinckrodt in a deal valued at about $5.6 billion.

Sector News

While most of the major sectors moved to the downside, housing stocks posted particularly steep losses on the day. Reflecting the weakness among housing stocks, the Philadelphia Housing Sector Index tumbled by 2.6 percent.

KB Home (KBH), Vulcan Materials (VMC), and Masco (MAS) turned in some of the housing sector's worst performances.

Oil service stocks also saw significant weakness, dragging the Philadelphia Oil Service Index down by 2.2 percent. The weakness in the oil service sector came as crude for May delivery slid $0.70 to $100.44 a barrel.

Considerable weakness was also visible among brokerage stocks, which added to the steep losses posted in the two previous sessions. The NYSE Arca Broker/Dealer Index fell by 2.1 percent two a two-month closing low.

Electronic storage, chemical, and networking stocks also saw notable weakness, reflecting the broad based selling pressure on Wall Street.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved mostly lower during trading on Monday. Japan's Nikkei 225 Index dropped by 1.7 percent, while Hong Kong's Hang Seng Index ended the day down by 0.6 percent.

The major European markets also came under pressure on the day. While the German DAX Index plummeted by 1.9 percent, the U.K.'s FTSE 100 Index and the French CAC 40 Index both tumbled by 1.1 percent.

In the bond market, treasuries moved moderately higher, extending the strong upward move seen last Friday. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, fell by 3.1 basis points to 2.695 percent.

Looking Ahead

Tuesday represents another quiet day on the U.S. economic front, potentially leading to choppy trading ahead of the release of Alcoa's quarterly results after the close of trading.