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Stocks Nearly Flat On The Heels Of Mixed Catalysts - U.S. Commentary


Stocks have turned in a lackluster performance over the course of the trading day on Tuesday after ending the previous session substantially higher. A mixed batch of news has contributed to the choppy trading on Wall Street.

After seeing initial weakness, the major averages have climbed back near the unchanged line. While the Dow remains down 5.18 points or less than a tenth of a percent at 12,790.78, the Nasdaq is up 2.61 points or 0.1 percent at 2,918.68 and the S&P 500 is up 1.87 points or 0.1 percent at 1,388.76.

The early weakness on Wall Street was partly due to news that Moody's Investors Service downgraded France's government bond rating by one notch to Aa1 from Aaa. The ratings agency added that the outlook remains negative.

Moody's said France's long-term economic growth outlook is negatively affected by multiple structural challenges and said the fiscal outlook is uncertain as a result of the deteriorating economic prospects.

Nonetheless, selling pressure remained subdued following the release of a report from the Commerce Department showing an unexpected increase in U.S. housing starts.

The report said housing starts climbed 3.6 percent to a seasonally adjusted annual rate of 894,000 in October, reaching their highest level in over four years.

While the markets have subsequently recovered from the initial downward move, lingering uncertainty about the looming fiscal cliff has limited the upside for the markets.

Among individual stocks, shares of Hewlett-Packard (HPQ) have moved sharply lower on the day, with the PC giant currently down by 10.4 percent after hitting a ten-year low.

The loss by HP comes after the company reported better than expected adjusted fourth quarter earnings but revealed an $8.8 billion charge related to serious accounting improprieties at newly acquired Autonomy Corp.

Consumer electronic retailer Best Buy (BBY) is also posting a notable loss after reporting third quarter earnings that came in well below analyst estimates. After also hitting a ten-year low, shares of Best Buy are down by 10.8 percent.

Meanwhile, shares of Krispy Kreme Doughnuts (KKD) have surged up by 21 percent after the doughnut maker reported better than expected third quarter results and provided upbeat guidance. Krispy Kreme reached its highest intraday level in over a year earlier in the session.

Sector News

Most of the major sectors are showing only modest moves in mid-day trading, although housing stocks are seeing considerable strength on the heels of the upbeat housing starts report.

Reflecting the strength in the housing sector, the Philadelphia Housing sector Index is up by 2.5 percent, climbing further off last Thursday's two-month closing low.

Airline and biotechnology are also seeing notable strength on the day, while computer hardware stocks are seeing some weakness following the news from HP.

Oil service stocks have also moved to the downside amid a sharp drop by the price of crude oil, which has fallen by about $1.70 a barrel.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region turned in a mixed performance during trading on Tuesday. While Japan's Nikkei 225 Index edged down by 0.1 percent, Australia's All Ordinaries Index rose by 0.6 percent.

Meanwhile, the major European markets all moved to the upside over the course of the session. The U.K.'s FTSE 100 Index inched up by 0.2 percent, while the French CAC 40 Index and the German DAX Index both advanced by 0.7 percent.

In the bond market, treasuries have come under pressure, pulling back further off their recent highs. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, is up by 3.8 basis points at 1.649 percent.

by RTTNews Staff Writer

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