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Stocks Under Pressure Amid Renewed Overseas Worries - U.S. Commentary

Stocks are seeing notable weakness in mid-day trading on Monday, as better than expected U.S. economic data has been overshadowed by some troubling economic news from overseas. The markets are pulling back further off the multi-year highs set last week.

The major averages have moved roughly sideways in recent trading, lingering firmly in negative territory. The Dow is down 65.99 points or 0.5 percent at 12,911.58, the Nasdaq is down 24.83 points or 0.8 percent at 2,951.36 and the S&P 500 is down 8.21 points or 0.6 percent at 1,361.42.

Much of the weakness on Wall Street stems from news that China has cut its outlook for GDP growth in 2012, raising concerns about demand in the world's second largest economy.

Chinese Premier Wen Jiabao said that the government now expects the economy to expand by 7.5 percent in 2012 compared with its previous estimate for 8 percent growth.

Negative sentiment has also been generated by a report from Markit Economics indicating that the Eurozone private sector contracted more than initially estimated in February.

Markit said its final composite output index fell to 49.3 in February from 50.4 in January, coming in below the earlier flash estimate of 49.7. The overall contraction in output reflected a renewed decline in service sector activity.

As a result of the troubling news from overseas, traders have largely shrugged of the release of a report from the Institute for Supply Management showing that U.S. service sector activity unexpectedly expanded at a faster rate in the month of February.

The ISM said its non-manufacturing index rose to 57.3 in February from 56.8 in January, with a reading above 50 indicating growth in the service sector. The increase surprised economists, who had expected the index to edge down to a reading of 56.0.

With the unexpected increase, the index rose to its highest level since coming in at a reading of 59.0 in February of 2011.

A separate report from the Commerce Department showed that new orders for U.S. manufactured goods fell by less than anticipated in the month of January.

In corporate news, shares of Citigroup (C) are down by 1.7 percent after the financial giant announced that Richard Parsons is stepping down as Chairman. The company said that its board plans to select Michael O'Neill to succeed Parsons.

Sector News

Reflecting the concerns about the outlook for Chinese demand, steel stocks are posting particularly steep losses in mid-day trading. The NYSE Arca Steel Index has plunged by 2.7 percent, falling to its worst intraday level in well over a month.

AK Steel (AKS) and U.S. Steel (X) are turning in two of the steel sector's worst performances, sliding by 6.1 percent and 4.6 percent, respectively.

Gold stocks are also seeing considerable weakness on the day, resulting in a 2.1 percent loss by the NYSE Arca Gold Bugs Index. The weakness among gold stocks comes as the price of gold for April delivery is falling $3.70 to $1,706.10 an ounce.

Significant weakness is also visible among semiconductor stocks, as reflected by the 2.3 percent loss being posted by the Philadelphia Semiconductor Index. The index has fallen to a one-month low amid sharp drops by Advanced Micro Devices (AMD) and Micron (MU).

Most of the other major sectors have also moved to the downside on the day, with oil service, chemical, and biotechnology stocks posting steep losses.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved mostly lower on Monday on the heels of the news out of China. Japan's Nikkei 225 Index fell by 0.8 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 German DAX Index slid by 0.8 percent, the U.K.'s FTSE 100 Index and the French CAC 40 Index dropped by 0.6 percent and 0.4 percent, respectively.

In the bond market, treasuries have seen some volatility over the course of the session and have recently moved lower. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, is up by 1.9 basis points at 2.005 percent.

by RTTNews Staff Writer

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