Stocks Turn Lower After Seeing Initial Strength - U.S. Commentary

wallstreet2 103112 12Jun13

After failing to sustain an initial upward move, stocks have turned lower over the course of the trading day on Wednesday. The major averages have pulled back well off their highs for the session and into negative territory.

The major averages have bounced off their new lows for the session in the past few minutes but remain firmly in the red. The Dow is down 55.06 points or 0.4 percent at 15,066.96, the Nasdaq is down 18.14 points or 0.5 percent at 3,418.80 and the S&P 500 is down 6.44 points or 0.4 percent at 1,619.69.

While traders went bargain hunting at the open following yesterday's weakness, buying interest waned not long after the start of trading.

The subsequent pullback by stocks reflected the recent downward momentum for the markets amid lingering concerns about the outlook for the Federal Reserve's stimulus program.

Concerns about the situation in Turkey are also weighing on the markets after riot police used tear gas and water cannons to clear anti-government protesters from Istanbul's Taksim Square.

Trading activity has remained relatively subdued, however, with some traders staying on the sidelines amid another quiet day on the U.S. economic front.

The economic calendar will finally pick up in the last two days of the week, with traders likely to keep a close eye on reports on retail sales, weekly jobless claims, and industrial production.

Among individual stocks, shares of First Solar (FSLR) have come under pressure after the solar power company said it commenced an underwritten public offering of 8.5 million shares of its common stock. The company said it intends to use the net proceeds from the offering for general corporate purposes.

PDL BioPharma (PDLI) is also posting a notable loss after the biopharmaceutical company forecast second quarter royalty revenues of approximately $143 million compared with actual royalty revenue of $126 million in the year-ago quarter.

Meanwhile, shares of Rambus (RMBS) are seeing significant strength after the chipmaker settled a long-standing patent dispute with South Korean chipmaker Hynix. The settlement calls for Hynix to pay Rambus $240 million over the next five years.

Sector News

Despite the pullback by the broader markets, significant strength remains visible among gold stocks. After ending the previous session sharply lower, the NYSE Arca Gold Bugs Index has surged up by 2.1 percent.

The strength among gold stocks comes amid a notable increase by the price of the precious metal, with gold for August delivery climbing $15.40 to $1,392.40 an ounce.

Most of the other major sectors are showing only modest moves, although weakness has emerged among utilities, internet, and telecom stocks.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region saw some further downside after coming under pressure in the previous session. Japan's Nikkei 225 Index edged down by 0.2 percent, while Australia's All Ordinaries Index fell by 0.7 percent.

The major European markets also ended the day lower. While the German DAX Index slid by 1 percent, the U.K.'s FTSE 100 Index and the French CAC 40 Index dropped by 0.6 percent and 0.4 percent, respectively.

In the bond market, treasuries have turned higher over the course of the session after seeing early weakness. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, is down by 1.7 basis points at 2.178 percent.

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