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Stocks Mostly Lower Amid Uncertainty About Earnings Season - U.S. Commentary


After ending the previous session moderately lower, stocks have seen some further downside during trading on Tuesday. Profit taking is contributing to the weakness on Wall Street along with uncertainty about the upcoming earnings season.

The major averages have recently climbed off their worst levels of the day but remain firmly in negative territory. The Dow is down 64.22 points or 0.5 percent at 13,320.07, the Nasdaq is down 16.46 points or 0.5 percent at 3,082.35 and the S&P 500 is down 7.40 points or 0.5 percent at 1,454.49.

The weakness on Wall Street comes as traders continue to cash in on the recent strength in the markets, which lifted the S&P 500 to a five-year closing high last Friday.

Anxiety ahead of the upcoming earnings season has also generated some negative sentiment, with aluminum giant Alcoa (AA) due to release its quarterly results after the close of trading.

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

Analysts expect Alcoa to report earnings of $0.06 per share compared to a year-ago loss of $0.03 per share. However, revenues for the quarter are expected to fall to $5.6 billion from $6 billion last year.

Despite the pullback by the markets, stocks are holding on to the bulk of last week's gains, which largely came on the heels of the fiscal cliff agreement.

Among individual stocks, shares of Sears Holdings (SHLD) have come under pressure after the retailer announced that Louis D'Ambrosio is stepping down as CEO due to family health matters. The company said its Chairman Edward Lampert will assume the additional role of CEO.

Fast food giant Yum! Brands (YUM) is also posting a notable loss after the company lowered its sales guidance for its China division due to in part to adverse publicity associated with a government review of the Chinese poultry supply.

On the other hand, shares of Monsanto (MON) have shown a strong upward move after the agricultural products giant reported much stronger than expected first quarter earnings and raised its full-year guidance.

Sector News

After moving sharply higher in recent sessions, networking stocks have shown a substantial move back to the downside. The NYSE Arca Networking Index is down by 2.5 percent, pulling back well off the eight-month closing high set on Monday.

Alcatel-Lucent (ALU) has helped to lead the networking sector lower, falling by 7.5 percent after ending the previous session at its best closing level in over eight months.

Significant weakness has also emerged among computer hardware stocks, as reflected by the 2 percent loss being posted by the NYSE Arca Computer Hardware Index. NetApp (NTAP), Dell (DELL), and Logitech (LOGI) are turning in some of the sector's worst performances.

Trucking stocks have also come under considerable selling pressure, dragging the Dow Jones Trucking Index down by 1.2 percent. Steel, oil service, and telecom stocks are also posting notable losses.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved mostly lower during trading on Tuesday. Japan's Nikkei 225 Index and Hong Kong's Hang Seng Index both fell by 0.9 percent, while Australia's All Ordinaries Index dropped by 0.5 percent.

Meanwhile, the major European markets ended the day mixed. While the French CAC 40 Index closed just above the unchanged line, the U.K.'s FTSE 100 Index edged down by 0.2 percent and the German DAX Index fell by 0.5 percent.

In the bond market, treasuries have moved to the upside, continuing to recover from last week's sell-off. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, is down by 3.2 basis points at 1.871 percent.

by RTTNews Staff Writer

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