Renewed Interest Rate Worries Lead To Pullback On Wall Street - U.S. Commentary

(RTTNews) - After seeing modest strength in morning trading, stocks came under pressure over the course of the trading day on Tuesday. With the downturn, the tech-heavy Nasdaq pulled back further off the fifteen-year closing high set last Friday.

The major averages saw further downside going into the close, ending the session at their worst levels of the day. The Dow fell 104.90 points or 0.6 percent to 18,011.14, the Nasdaq slid 16.25 points or 0.3 percent to 4,994.73 and the S&P 500 dropped 12.92 points or 0.6 percent to 2,091.50.

The pullback on Wall Street was partly due to renewed concerns about the outlook for interest rates on the heels of some upbeat housing data.

The Commerce Department released a report showing that new home sales surged up by 7.8 percent to an annual rate of 539,000 in February from the revised January rate of 500,000.

The increase came as a surprise to economists, who had expected new home sales to drop to a rate of 462,000 from the 481,000 originally reported for the previous month.

With the unexpected increase, new home sales rose to their highest level since hitting a rate of 593,000 in February of 2008.

Peter Boockvar, managing director at the Lindsey Group, said, "Bottom line, with realtors complaining about the lack of product (as stated in yesterday's existing home sales release), home builders responded with more new home sales."

"We still though need more first time households to choose buying instead of renting," he added. "This will happen soon if rents continue going up by 3.5% but home price gains need to slow further as well."

Meanwhile, the Labor Department released a separate report before the start of trading showing a modest rebound in consumer prices.

The Labor Department said its consumer price index edged up by 0.2 percent in February after tumbling by 0.7 percent in January. The modest increase by the index matched the consensus estimate.

Core consumer prices, which exclude food and energy prices, also rose by 0.2 percent for the second consecutive month. Economists had expected core prices to inch up by 0.1 percent.

Sector News

While many of the major sectors ended the day showing only modest moves, considerable weakness was visible among electronic storage stocks. Reflecting the weakness in the storage sector, the NYSE Arca Disk Drive Index dropped by 1.2 percent.

NetApp (NTAP), EMC Corp. (EMC), and Western Digital (WDC) turned in some of the storage sector's worst performances on the day.

Utilities stocks also came under pressure over the course of the session amid the concerns about interest rates, resulting in a 1.2 percent loss by the Dow Jones Utilities Average.

Trucking, telecom, and steel stocks also moved to the downside on the day, while housing stocks saw some strength on the heels of the upbeat new home sales data.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region turned in another mixed performance during trading on Tuesday. Japan's Nikkei 225 Index slipped by 0.2 percent, while Australia's All Ordinaries Index rose by 0.2 percent.

The major European markets also ended the day mixed. While the U.K.'s FTSE 100 Index dipped by 0.3 percent, the French CAC 40 Index and the German DAX Index advanced by 0.7 percent and 0.9 percent, respectively.

In the bond market, treasuries moved higher over the course of the session, extending a recent upward trend. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, fell by 3.7 basis points to 1.878 percent.

Looking Ahead Economic data may continue to attract attention on Wednesday, as the Commerce Department is due to release a report on durable goods orders.