Stocks Pull Back Sharply Amid Interest Rate Uncertainty - U.S. Commentary

(RTTNews) - Following the recovery rally seen in the previous session, stocks showed a significant move back to the downside during trading on Tuesday. With the losses on the day, the Dow and the S&P 500 more than offset yesterday's gains.

The major averages finished the day notably lower but off their worst levels of the session. The Dow plunged 258.32 points or 1.4 percent to 18,066.75, the Nasdaq tumbled 56.63 points or 1.1 percent to 5,155.25 and the S&P 500 plummeted 32.02 points or 1.5 percent to 2,127.02.

Continued uncertainty about the outlook for interest rates weighed on the markets ahead of next week's Federal Reserve meeting.

While recent disappointing economic data has led many analysts to predict that the Fed will leave rates unchanged, a few central bank officials have made hawkish comments.

The Fed is scheduled to hold a two-day meeting starting next Tuesday and announce its policy decision next Wednesday afternoon.

The central bank is also due to reveal its updated economic forecasts followed by a press conference by Fed Chair Janet Yellen.

Adding to the uncertainty about the outlook for rates is the lack of major U.S. economic data scheduled to be released on the day.

The economic calendar will pick up considerably in the coming days with the release of reports on retail sales, industrial production, and producer and consumer price inflation.

A decrease by the price of crude oil also generated selling pressure, with crude for October delivery slumping $1.39 to $44.90 a barrel after ending Monday's session up $0.41 at $46.29 a barrel.

Sector News

Most of the major sectors moved notably lower over the course of the trading session reflecting the broad based weakness on Wall Street.

Steel stocks turned in some of the market's worst performances, dragging the NYSE Arca Steel Index down by 5.7 percent. With the drop, the index fell to a two-month closing low.

Considerable weakness was also visible among gold stocks, as reflected by the 4.3 percent loss posted by the NYSE Arca Gold Bugs Index. The weakness in the sector came as gold for December slipped $1.90 to $1,323.70 an ounce.

Energy stocks also saw significant weakness amid the drop by the price of crude oil. The Philadelphia Oil Service Index plunged by 3.2 percent, while the NYSE Arca Oil & Gas Index tumbled by 2.9 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 rose by 0.3 percent, while Hong Kong's Hang Seng Index fell by 0.3 percent.

Meanwhile, the major European markets all moved to the downside on the day. While the French CAC 40 Index slumped by 1.2 percent, the U.K.'s FTSE 100 Index and the German DAX Index dropped by 0.5 percent and 0.4 percent, respectively.

In the bond market, treasuries slid firmly into negative territory as the trading day progressed. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, climbed 6.2 basis points to 1.734 percent.

Looking Ahead

The economic calendar remains relatively quiet on Wednesday, although traders are likely to keep an eye on a report on import and exports prices.