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Stocks Close Firmly Negative Amid Troubling News From Overseas - U.S. Commentary

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After moving sharply lower at the start of trading on Tuesday, stocks saw some volatility over the course of the session but maintained a negative bias throughout the day. Disappointing news from overseas weighed on the markets.

The major averages ended the day firmly in negative territory although off their lows for the session. The Dow fell 116.57 points or 0.8 percent to 15,122.02, the Nasdaq slid 36.82 points or 1.1 percent to 3,436.95 and the S&P 500 dropped 16.68 points or 1 percent to 1,626.13.

The weakness visible on Wall Street was partly due to a negative reaction to the Bank of Japan's latest monetary policy decision.

Overnight, the Bank of Japan unanimously decided to retain its target of doubling the monetary base in two years but did not announce any new steps to curb bond market volatility.

The central bank said its money market operations will continue to target an expansion of the monetary base at an annual pace of 60-70 trillion yen, as announced in April. At the same time, the Bank of Japan upgraded its view of the economy.

"The Bank of Japan's Policy Board was content simply to upgrade its economic assessment today," Capital Economics said in a research note. "This disappointed those hoping for further monetary easing in response to the recent volatility in financial markets."

Negative sentiment was also generated by reports of escalating violence in Istanbul's Taksim Square, where thousands of anti-government protesters have gathered.

Turkish riot police reportedly used tear gas and water cannons in an effort to drive the protesters from the square after a day of clashes.

Meanwhile, traders largely shrugged off a report from the Commerce Department showing that wholesale inventories rose in line with economist estimates in April.

The report said wholesale inventories edged up by 0.2 percent in April following a revised 0.3 percent increase in March.

Later in the week, trading could be impacted by the release of more closely watched reports on retail sales, jobless claims, and industrial production.

Sector News

Despite the volatility shown by the broader markets, gold stocks saw substantial weakness throughout the trading session. Reflecting the weakness in the gold sector, the NYSE Arca Gold Bugs Index plummeted by 3.5 percent.

The weakness among gold stocks came amid a decrease by the price of the precious metal, with gold for August delivery sliding $9 to $1,377 an ounce.

Housing stocks also saw considerable weakness on the day, dragging the Philadelphia Housing Sector Index down by 2.2 percent. With the loss, the index fell to its worst closing level in over a month.

Significant weakness was also visible among semiconductor stocks, as reflected by the 2.2 percent loss posted by the Philadelphia Semiconductor Index. Mellanox Technologies (MLNX) helped to lead the sector lower, tumbling by 5.7 percent.

Banking, steel, natural gas, and oil service stocks also ended the day notably lower, moving to the downside along with most of the major sectors.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved mostly lower during trading on Tuesday. Japan's Nikkei 225 Index tumbled by 1.5 percent, while Hong Kong's Hang Seng Index ended the day down by 1.2 percent.

The major European markets also came under significant selling pressure on the day. While the French CAC 40 Index dropped by 1.4 percent, the German DAX Index and the U.K.'s FTSE 100 Index fell by 1 percent and 0.9 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, edged down by 2 basis points to 2.195 percent after reaching a high of 2.269 percent

Looking Ahead

Trading activity on Wednesday may be somewhat subdued amid another relatively quiet day on the U.S. economic front.

by RTT Staff Writer

For comments and feedback: editorial@rttnews.com

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