Profit Taking Contributes To Notable Weakness On Wall Street - U.S. Commentary

(RTTNews) - After showing a lack of direction throughout the previous session, stocks moved notably lower over the course of the trading day on Wednesday. Selling pressure picked up in afternoon trading, dragging the major averages more firmly into negative territory.

The major averages climbed off their worst levels going into the close but remained stuck in the red. The Dow slid 101.47 point or 0.6 percent to 16,613.97, the Nasdaq fell 29.54 points or 0.7 percent to 4,100.63 and the S&P 500 dropped 8.92 points or 0.5 percent to 1,888.53.

The weakness on Wall Street was partly due to profit taking, with the Dow and the S&P 500 giving back ground after ending the previous session at new record closing highs.

Troubling inflation data also weighed on the markets, with a report from the Labor Department showing that producer prices rose at their fastest pace in over a year in April.

The Labor Department said its producer price index for final demand rose by 0.6 percent in April following a 0.5 percent increase in March. Economists had been expecting producer prices to edge up by about 0.2 percent.

Core producer prices, which exclude food and energy, also showed continued growth, climbing by 0.5 percent in April after rising by 0.6 percent in March. Core prices had been expected to rise by 0.2 percent.

Peter Boockvar, chief market analyst at the Lindsey Group, said the continued increases in producer prices bears watching, "especially in an environment where many don't think we have any inflation."

He added, "We actually have seen massive monetary inflation that has showed up in asset prices of all kinds but hasn't yet spilled into the conventional PPI, CPI, PCE figures until maybe now?"

The pullback by stocks also came amid a rally by treasuries, with some traders moving their money out of risky assets and into safer havens.

Among individual stocks, shares of Fossil (FOSL) fell sharply after the fashion accessory maker reported better than expected first quarter results but provided disappointing second quarter guidance.

Video game publisher Take-Two Interactive (TTWO) also came under pressure after forecasting a wider than expected fiscal first quarter loss.

On the other hand, shares of Arotech (ARTX) rallied after the defense and security products company reported better than expected first quarter earnings.

Sector News

After ending the previous session notably lower, brokerage stocks saw some further downside on the day. The NYSE Arca Broker/Dealer Index dropped by 2 percent, moving toward the low end of a recent trading range.

GFI Group (GFIG) and E*Trade (ETFC) turned in two of the brokerage sector's worst performances, falling by 4.3 percent and 3.4 percent, respectively.

Considerable weakness also emerged among airline stocks, as reflected by the 1.8 percent loss posted by the NYSE Arca Airline Index. With the loss, the index pulled back further off the twelve-year closing high it set on Monday.

SkyWest (SKYW) helped lead the airline sector lower after reporting a 0.5 percent year-over-year decrease in traffic for April.

Defense, housing, and networking stocks also came under pressure on the day, while gold stocks bucked the downtrend amid an increase by the price of the precious metal.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region turned in a mixed performance during trading on Wednesday. Japan's Nikkei 225 Index edged down by 0.1 percent, while Hong Kong's Hang Seng Index surged up by 1 percent.

The major European markets ended the day nearly flat. While the U.K.'s FTSE 100 Index inched up by 0.1 percent, the French CAC 40 Index dipped by 0.1 percent and the German DAX Index closed just below the unchanged line.

In the bond market, treasuries moved sharply higher, extending the upward move seen in the previous session. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, tumbled by 7.5 basis points to a six-month closing low of 2.543 percent.

Looking Ahead

A slew of U.S. economic data is scheduled to be released on Thursday, including reports on weekly jobless claims, industrial production, and consumer price inflation.

Earnings news may also be in focus, with networking giant Cisco (CSCO) releasing its quarterly results after the close of today's trading and retail giant Wal-Mart (WMT) scheduled to report its results before the start of trading on Thursday.