Stocks Pull Back Sharply Following Yesterday's Rally - U.S. Commentary

(RTTNews) - Stocks moved sharply lower over the course of the trading day on Tuesday, partly offsetting the strong gains posted in the previous session. Despite the pullback, the major averages remain well off the lows set earlier this month.

The major averages finished the day firmly in negative territory. The Dow slumped 188.88 points or 1.1 percent to 16,431.78, the Nasdaq plunged 67.02 points or 1.5 percent to 4,503.58 and the S&P 500 dove 24.23 points or 1.3 percent to 1,921.27.

The weakness on Wall Street was partly due to profit taking after Monday's rally, which lifted the Dow and the S&P 500 to their best closing levels in over a month.

A sharp pullback by the price of crude oil also weighed on the markets, as oil prices have recently been a key driver for stocks.

Crude for April delivery tumbled $1.52 to $31.87 a barrel after surging up $1.64 to $33.39 a barrel in the previous session.

Worries a proposed production freeze will not impact the global supply glut contributed to the pullback by the price of oil.

On the U.S. economic front, the Conference Board released a report showing that consumer confidence fell by much more than expected in the month of February.

The Conference Board said its consumer confidence index tumbled to 92.2 in February from a revised 97.8 in January. Economists had expected the consumer confidence index to dip to 97.2.

Meanwhile, a separate report from the National Association of Realtors showed an unexpected increase in existing home sales in January.

NAR said existing home sales rose 0.4 percent to a seasonally adjusted annual rate of 5.47 million in January from a downwardly revised 5.45 million in December.

The modest increase came as a surprise to economists, who had expected existing home sales to drop to an annual rate of 5.32 million.

Sector News

After helping to lead the markets higher in the previous session, energy stocks saw substantial weakness on the day amid the pullback by the price of crude oil.

The NYSE Arca Natural Gas Index plunged by 5 percent, the Philadelphia Oil Service Index plummeted by 4.7 percent and the NYSE Arca Oil & Gas Index slumped by 3.9 percent.

Steel stocks also came under pressure after yesterday's strong gains, with the NYSE Arca Steel Index tumbling by 3.6 percent. The index ended Monday's trading at its best closing level in well over a month.

Considerable weakness was also visible among banking stocks, as reflected by the 3 percent loss posted by the Dow Jones Banks Index. Comerica (CMA), Zions Bancorp (ZION), and JP Morgan (JPM) posted notable losses.

Railroad, chemical, and computer hardware stocks also saw significant weakness on the day, while gold stocks were among the few groups to buck the downtrend.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved mostly lower during trading on Tuesday. Japan's Nikkei 225 Index fell by 0.4 percent, while Hong Kong's Hang Seng Index dipped by 0.3 percent.

The major European markets also showed notable moves to the downside on the day. While the German DAX Index slumped by 1.6 percent, the French CAC 40 Index and the U.K.'s FTSE 100 Index tumbled by 1.4 percent and 1.3 percent, respectively.

In the bond market, treasuries turned higher over the course of the session after seeing early weakness. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, fell by 2.1 basis points to 1.745 percent.

Looking Ahead

Trading on Wednesday may be impacted by reaction to a report on new home sales as well as earnings news from companies such as Target (TGT) and Lowe's (LOW).