Stocks moved notably lower over the course of the trading day on Tuesday, adding to the steep losses posted in the previous session. Worries about the financial situation in Europe once again contributed to the weakness on Wall Street.
The major averages regained some ground going into the close but still ended the day firmly in the red. The Dow fell 104.14 points or 0.8 percent to 12,617.32, the Nasdaq dropped 27.16 points or 0.9 percent to 2,862.99 and the S&P 500 slid 12.21 points or 0.9 percent to 1,338.31.
The sell-off on Wall Street came as traders expressed continued concerns about the ongoing European debt crisis and its impact on the global economy.
Adding to the concerns about Europe, credit ratings agency Moody's revised the outlooks on the Aaa sovereign ratings of Germany, the Netherlands and Luxembourg to negative from stable.
Moody's cited the rising uncertainty regarding the outcome of the euro area debt crisis, which stems in part from the increased likelihood of Greece's exit from the euro area.
In other troubling news out of Europe, flash estimates released by Markit Economics showed that its manufacturing index for the eurozone dipped by 1 point to 44.1 in July. On the other hand, the services index rose 0.5 points to 47.6.
The composite index for both industries remained below 50 for the sixth consecutive month, holding unchanged at 46.4, in line with expectations.
Further selling pressure was generated by a report from Reuters quoting European Union officials as saying that Greece is unlikely to be able to pay what it owes and will likely require further debt restructuring.
Helping to limit the downside for the markets, a separate report from Markit Economics showed that its index of Chinese manufacturing activity came in at 49.5 in July, up from 48.2 in June.
While the index remains below the key 50 level, it suggested the slowest contraction in manufacturing activity in five months. The modest improvement came about due to a rebound in output.
Traders also digested the latest batch of earnings news, including quarterly results from well known companies such as AT&T (T), DuPont (DD), and UPS (UPS). All three stocks ended the day in the red.
Reflecting broad based selling pressure, significant weakness was visible in a variety of sectors. Airline stocks posted particularly steep losses, dragging the NYSE Arca Airline Index down by 2.8 percent to a two-month closing low.
United Continental (UAL) helped to lead the airline sector lower, tumbling by 5.4 percent after revealing it incurred a $206 million charge in the second quarter due to integration and severance costs.
Steel stocks also saw substantial weakness amid concerns about the outlook for demand. Reflecting the weakness in the steel sector, the NYSE Arca Steel Index fell by 2.4 percent to its worst closing level in over nine months.
Considerable weakness also emerged among housing stocks, as reflected by the 2.2 percent loss posted by the Philadelphia Housing Sector Index. Networking, oil service, biotech, and chemical stocks also posted steep losses on the day.
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 0.2 percent, China's Shanghai Composite Index crept up by 0.2 percent.
Meanwhile, the major European markets all moved to the downside over the course of the trading day. The French CAC 40 Index fell by 0.9 percent, while the U.K.'s FTSE 100 Index and the German DAX Index dropped by 0.6 percent and 0.5 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 3.1 basis points to a new record closing low of 1.404 percent.
Following two relatively quiet days on the U.S. economic front, trading on Wednesday could be impacted by the release of a Commerce Department report on new home sales. Economists expect new home sales to edge up to an annual rate of 370,000 in June from 369,000 in May.
Reaction to quarterly results from Apple (AAPL) is also likely to impact trading, with the iPhone and iPad maker releasing its third quarter results after the close of today's trading.
Additionally, Boeing (BA), Caterpillar (CAT), PepsiCo (PEP), and Ford (F) are among the big-name companies due to release their quarterly results before the start of trading on Wednesday.
by RTT Staff Writer
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