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Stocks Seeing Continued Weakness After Initial Sell-Off - U.S. Commentary

Wallstreet2 111212 27Aug13

After moving sharply lower at the open, stocks have seen continued weakness throughout the trading day on Tuesday. Worries about recent developments regarding the situation in Syria continue to weigh on the markets after contributing to a late-day pullback in the previous session.

Currently, the major averages are stuck firmly in negative territory, near their worst levels of the day. The Dow is down 100.15 points or 0.7 percent at 14,846.31, the Nasdaq is down 45.10 points or 1.2 percent at 3,612.47 and the S&P 500 is down 16.18 points or 1 percent at 1,640.60.

The weakness on Wall Street reflects concerns that the U.S. is moving closer to taking military action in Syria in response to reports that the government used chemicals weapons.

In a statement to reporters on Monday, Secretary of State John Kerry said the Syrian government's use of chemical weapons against civilians is "undeniable" and argued that President Bashar al-Assad's regime must be held accountable.

Adding to speculation about possible U.S. military intervention, Defense Secretary Chuck Hagel told the BBC that American forces are "ready" to launch strikes on Syria if Obama chooses to order an attack.

Hagel told the BBC the Defense Department has provided Obama with "all options for all contingencies," adding, "We are ready to go."

Meanwhile, Russia and China have warned the U.S. against possible military intervention in Syria, with Moscow arguing that it could have "catastrophic consequences" for the region.

The worries about the situation in Syria have largely overshadowed a pair of economic report showing rising U.S. home prices and consumer confidence.

A report from Standard & Poor's showed that home prices in major U.S. metropolitan areas continued to increase in the month of June, although the price growth came in just shy of economist estimates.

Separately, the Conference Board released a report showing that consumer confidence unexpectedly saw a modest improvement in the month of August.

The Conference Board said its consumer confidence index edged up to 81.5 in August from an upwardly revised 81.0 in July. The modest increase came as a surprise to economists, who had expected the index to dip to 78.0 from the 80.3 originally reported for the previous month.

Sector News

Airline stocks are turning in some of the market's worst performances on the day, with the NYSE Arca Airline Index down by 3.8 percent. The drop has pulled the index down to a two-month intraday low.

The weakness among airline stocks comes as the price of crude oil has shot up by more than $3 a barrel, raising concerns about higher jet fuel prices.

Significant weakness has also emerged among biotechnology stocks, as reflected by the 2.7 percent loss being posted by the NYSE Arca Biotechnology Index. Amgen (AMGN) is posting a notable loss after surging higher on Monday on news of its acquisition of Onyx Pharmaceuticals (ONXX).

Banking stocks have also come under considerable selling pressure over the course of the session, dragging the KBW Bank Index down by 2.3 percent. With the loss, the index has fallen to its lowest intraday level in well over a month.

Housing, networking, trucking, and semiconductor stocks are also posting steep losses on the day, reflecting broad based weakness on Wall Street.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved mostly lower during trading on Tuesday. Japan's Nikkei 225 Index fell by 0.7 percent, while Hong Kong's Hang Seng Index ended the day down by 0.6 percent.

The major European markets also came under pressure on the day. While the U.K.'s FTSE 100 Index fell by 0.8 percent, the German DAX Index and the French CAC 40 Index tumbled by 2.3 percent and 2.4 percent, respectively.

In the bond market, treasuries have moved to the upside, climbing further off their recent lows. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, is down by 4.9 basis points at 2.756 percent.

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