Stocks Fall Sharply After Initially Seeing Choppy Trading - U.S. Commentary

(RTTNews) - After initially showing a lack of direction, stocks moved sharply lower over the course of the trading day on Monday. The weakness that emerged on the day came after the markets turned in a lackluster performance over the past few sessions.

The major averages climbed off their worst levels going into the close but remained firmly in the red. The Dow tumbled 179.11 points or 1.1 percent to 16,257.94, the Nasdaq plunged 61.36 points or 1.5 percent to 4,113.30 and the S&P 500 plummeted 23.17 points or 1.3 percent to 1,819.20.

Last Friday's disappointing jobs report may have weighed on the markets, as the data has introduced some uncertainty regarding the economic outlook.

The report said non-farm payroll employment edged up by 74,000 jobs in December compared to economist estimates for an increase of about 200,000 jobs.

While the report also showed that the unemployment rate unexpectedly dropped to a five-year low of 6.7 percent, the decrease came as some unemployed people gave up looking for work.

Selling pressure was also generated by remarks from Atlanta Federal Reserve President Dennis Lockhart, who said he would support a continued reduction in stimulus.

"If the positive outlook I've outlined plays out, I would support similar tapering steps over the course of this year," Lockhart said in a speech to the Rotary Club of Atlanta.

He added, "Of course, the Committee will assess how things are going, economically speaking, at each meeting, and decide on the next step."

Among individual stocks, shares of Lululemon (LULU) showed a steep drop after the yoga-wear retailer cut its fourth quarter guidance due to weak sales in January. Lululemon plunged 16.6 percent on the day.

Apparel and accessory retailer Express (EXPR) also came under pressure after lowering its fourth quarter guidance as a result of a deeper than anticipated drop in traffic.

Meanwhile, shares of Beam (BEAM) moved sharply higher after the whiskey maker agreed to be acquired by Suntory Holdings for $83.50 per share in cash or a total consideration of approximately $16 billion, including the assumption of Beam's outstanding debt.

Sector News

After trending higher in recent sessions, biotechnology stocks showed a substantial move back to the downside. The NYSE Arca Biotechnology Index tumbled by 2.2 percent, pulling back off the record closing high set last Friday.

Biogen Idec (BIIB) and InterMune (ITMN) turned in two of the biotech sector's worst performances, falling by 5.2 percent and 4.4 percent, respectively.

Housing stocks also came under considerable pressure on the day, dragging the Philadelphia Housing Sector Index down by 2.2 percent. The loss by the index came after it ended the previous session at its best closing level in over seven months.

Significant weakness was also visible among oil stocks, which moved lower along with the price of crude oil. With crude for February delivery sliding $0.92 to $91.80 a barrel, the NYSE Arca Oil Index dropped by 2 percent.

Software, retail, natural gas and chemical stocks also saw notable weakness on the day, while gold stocks bucked the downtrend by the broader markets.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region finished Monday's trading mixed. Hong Kong's Hang Seng Index edged up by 0.2 percent, while Australia's All Ordinaries Index dropped by 0.4 percent. The Japanese markets remained closed for a holiday.

Meanwhile, the major European markets all moved to the upside on the day. While the German DAX Index rose by 0.4 percent, the U.K.'s FTSE 100 Index and the French CAC 40 Index both ended the day up by 0.3 percent.

In the bond market, treasuries moved moderately higher, extending the rally that was seen last Friday. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, fell by 3.3 basis points to 2.827 percent.

Looking Ahead

Trading on Tuesday is likely to be impacted by the release of the Commerce Department's retail sales report, which is expected to show flat sales in December. Reports on import and export prices and business inventories are also scheduled to be released.

On the earnings front, JP Morgan (JPM) and Wells Fargo (WFC) are among the companies due to report their quarterly results before the start of trading on Tuesday.