Stocks Seeing Further Downside Following Early Decline - U.S. Commentary

(RTTNews) - After moving moderately lower in early trading on Monday, stocks have seen further downside as the trading day has progressed. With the drop on the day, the Dow has pulled back well off last Friday's record closing high.

Currently, the major averages are posting notable losses, near their lows for the session. The Dow is down 78.99 points or 0.5 percent at 17,200.75, the Nasdaq is down 60.76 points or 1.3 percent at 4,519.03 and the S&P 500 is down 16.76 points or 0.8 percent at 1,993.64.

The weakness on Wall Street is partly due to profit taking following the recent strength in the markets, which lifted the Dow and the S&P 500 to new record highs last week.

Negative sentiment has also been generated by comments from Chinese Finance Minister Lou Jiwei indicating that China won't dramatically alter its economic policy despite signs of downward pressure on growth.

Peter Boockvar, managing director at the Lindsey Group, said, "With the current slowdown in economic activity in China mostly due to the air coming out of the property market bubble, many assume Chinese officials will just provide another round of massive stimulus."

"Instead, however, we've gotten only small doses and it looks like that will be the most we'll see as China realizes that it must wean itself off the vicious cycle of stimulus, slowdown, stimulus, slowdown, etc.," he added.

Additionally, the National Association of Realtors released a report showing an unexpected drop in U.S. existing home sales in the month of August.

NAR said existing home sales fell 1.8 percent to a seasonally adjusted annual rate of 5.05 million in August from a downwardly revised 5.14 million in July.

The drop came as a surprise to economists, who had expected existing home sales to climb to an annual rate of 5.18 million.

Among individual stocks, shares of Alibaba (BABA) are giving back some ground after the Chinese e-commerce giant surged up by 38.1 percent in its first day of trading last Friday.

Drugstore chain Walgreen (WAG) has also come under pressure on the day after Barclays downgraded its rating on the company's stock to Equal-weight from Overweight.

On the other hand, shares of Sigma-Aldrich (SIAL) are moving sharply higher after the chemical firm agreed to be acquired by German drug company Merck for $17 billion.

Sector News

Reflecting concerns about the outlook for demand from China, steel stocks have moved sharply lower over the course of the session. The NYSE Arca Steel Index has tumbled by 2.7 percent to its lowest intraday level in almost three months.

Mechel (MTL) has helped to lead the steel sector lower, with the Russian mining and steel company plunging by 26.2 percent.

Significant weakness also remains visible among internet stocks, as reflected by the 2.4 percent loss being posted by the Dow Jones Internet Index. Yahoo (YHOO) is posting a steep loss following a downgrade by Bank of America.

Oil service stocks are also seeing considerable weakness in mid-day trading, with the Philadelphia Oil Service Index down by 2.2 percent. The weakness in the sector comes as crude for October delivery is sliding $0.86 to $91.55 a barrel.

Airline, electronic storage, natural gas and housing stocks are also under pressure amid broad based weakness 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 slumped by 0.7 percent, while Hong Kong's Hang Seng Index tumbled by 1.4 percent.

The major European markets also moved to the downside on the day. While the U.K.'s FTSE 100 Index fell by 0.9 percent, the German DAX Index and the French CAC 40 Index dropped by 0.5 percent and 0.4 percent, respectively.

In the bond market, treasuries have moved moderately higher, climbing further off their recent lows. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, is down by 3.6 basis points at 2.551 percent.