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Stocks Fall Sharply On Economic Worries, Dow Hits 2-Month Low - U.S. Commentary

Stocks moved sharply lower over the course of the trading day on Tuesday, adding to the steep losses posted in the previous session. Renewed concerns about the global economic outlook contributed to another day of broad based selling pressure.

The major averages moved roughly sideways going into the close, ending the session near their worst levels of the day. The Dow tumbled 213.66 points or 1.7 percent to 12,715.93, the Nasdaq plunged 55.86 points or 1.8 percent to 2,991.22 and the S&P 500 plummeted 23.61 points or 1.7 percent to 1,358.59.

With the steep losses on the day, the Dow fell to its lowest closing level in over two months, while the S&P 500 set a one-month closing low.

The continued weakness on Wall Street came as some traders continued to cash in on the recent strength in the markets following last Friday's disappointing jobs report.

A sharply lower close by the major European markets also contributed to the pullback by U.S. stocks, as traders worried about the global economic impact of a recession in Europe.

Additionally, uncertainty about the upcoming earnings season added to selling pressure, with aluminum giant Alcoa (AA) releasing its first quarter results after the close of trading.

Alcoa is typically the first Dow component to report its quarterly results, and the release of its results is seen as the unofficial start of the earnings season.

Meanwhile, traders largely shrugged off a Commerce Department report showing a bigger than expected increase in wholesale inventories in the month of February.

The report showed that wholesale inventories increased by 0.9 percent in February compared to economist estimates for an increase of about 0.6 percent.

Among individual stocks, shares of ViroPharma (VPHM) came under pressure on news of the FDA's approval of generic versions of the company's drug Vancocin. ViroPharma tumbled by 21.6 percent to a four-month low.

Sony (SNE) also posted a notable loss after forecasting a wider than expected loss of $6.4 billion for the fiscal year ended March 31st. Shares of Sony closed down by 9.3 percent.

Meanwhile, Supervalu (SVU) jumped 15.2 percent after the supermarket operator reported better than expected adjusted fourth quarter earnings and forecast full-year earnings above analyst estimates.

Sector News

Most of the major sectors showed notable moves to the downside over the course of the trading day, reflecting the broad based selling pressure that emerged on Wall Street.

Housing stocks showed a substantial downward move on the day, resulting in a 3.9 percent loss by the Philadelphia Housing Sector Index down. Steep losses by Lennar (LEN) and PulteGroup (PHM) helped drag the index down to its lowest closing level in a month.

Considerable weakness also emerged among electronic storage stocks, as reflected by the 3.4 percent loss posted by the NYSE Arca Disk Drive Index, which fell to a two-month closing low.

Health insurance stocks also saw significant weakness, adding to the steep losses posted in the previous session. The Morgan Stanley Healthcare Payor Index fell by 2.9 percent after plummeting by 7.2 percent on Monday.

Biotechnology, networking, steel, and chemical stocks also posted notable losses on the day, while gold stocks bucked the downtrend once again.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region turned in a mixed performance on Tuesday. While Japan's Nikkei 225 Index edged down by 0.1 percent, China's Shanghai Composite Index advanced by 0.9 percent.

Meanwhile, the major European markets all showed substantial moves the downside over the course of the session. The French CAC 40 Index fell by 3.1 percent, the German DAX Index dropped by 2.5 percent, and the U.K.'s FTSE 100 Index slid by 2.2 percent.

In the bond market, treasuries moved notably higher on the day, extending a recent upward move. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, fell by 4.9 basis points to a one-month closing low of 1.988 percent.

Looking Ahead

Reaction to Alcoa's quarterly results may drive trading on Wednesday, although traders are also likely to keep an eye on the Federal Reserve's Beige Book and the Labor Department's monthly report on import and export prices.

by RTTNews Staff Writer

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