Worries About Fed Stimulus Continue To Weigh On Wall Street - U.S. Commentary

(RTTNews) - After coming under pressure over the course of the previous session, stocks saw some further downside during trading on Tuesday. Concerns about the outlook for the Federal Reserve's stimulus program continued to weigh on the markets.

The major averages climbed well off their lows for the session but still ended the day in the red. The Dow fell 94.15 points or 0.6 percent to 15,914.62, the Nasdaq dipped 8.06 points or 0.2 percent to 4,037.20 and the S&P 500 slid 5.75 points or 0.3 percent to 1,795.15.

With the losses on the day, the Dow and the S&P 500 closed lower for the third straight session, pulling back below the key psychological levels of 16,000 and 1,800, respectively.

The weakness on Wall Street came as traders continued to digest yesterday's better than expected reading on manufacturing activity.

The report from the Institute for Supply Management, which showed that the reading on national manufacturing activity unexpectedly rose to a two-year high in November, led to concerns about the outlook for the Federal Reserve's stimulus program.

Traders seemed worried that additional upbeat economic data may lead the Fed to begin scaling back its asset purchases as early as its next monetary policy meeting in two weeks.

Nonetheless, activity was somewhat subdued amid a lack of major U.S. economic data, with traders looking ahead to the release of a slew of data.

While all eyes are likely to be on the release of the Labor Department's monthly jobs report on Friday, several other key reports are also due to be released in the coming days.

Peter Boockvar, chief market analyst at the Lindsey Group, said, "After the impressive gains seen just over the past month, anything would be enough to see a breather in stocks but there is nothing more relevant than a rise in rates in reevaluating equity investment positions."

"This of course points to the importance of Friday's payroll figure," he added. "With respect to the U.S. economic data overall, the outlook is still very mixed."

Among individual stocks, shares of Krispy Kreme (KKD) fell sharply after the doughnut maker reported weaker than expected third quarter revenues and provided disappointing guidance.

Sector News

Extending a recent downward move, airline stocks saw considerable weakness on the day. The NYSE Arca Airline Index fell by 2.1 percent, pulling back further off the eleven-year closing high set last Wednesday.

SkyWest (SKYW), United Continental (UAL), and Republic Airways (RJET) turned in some of the airline sector's worst performances.

Gold stocks also came under pressure, dragging the NYSE Arca Gold Bugs Index down by 1.6 percent to a five-year closing low. The continued weakness in the sector came amid a modest decrease by the price of gold.

Significant weakness was also visible among chemical stocks, as reflected by the 1.4 percent loss posted by the Dow Jones Chemicals Index. Biotech, brokerage, and banking stocks also saw notable weakness.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region turned in another mixed performance during trading on Tuesday. Japan's Nikkei 225 Index advanced by 0.6 percent, while Hong Kong's Hang Seng Index fell by 0.5 percent.

Meanwhile, the major European markets all showed notable moves the downside on the day. While the U.K.'s FTSE 100 Index dropped by 1 percent, the German DAX Index tumbled by 1.9 percent and the French CAC 40 Index plunged by 2.7 percent.

In the bond market, treasuries saw modest strength after ending the previous session firmly in the red. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, fell by 2.6 basis points to 2.775 percent.

Looking Ahead

Trading on Wednesday is likely to be impacted by the release of some key economic data, including reports on private sector employment, new home sales and service sector activity.