Stocks Close Mostly Lower Amid Steep Drop In Oil Prices - U.S. Commentary

(RTTNews) - Following the strength seen in the previous session, stocks moved notably lower over the course of the trading day on Tuesday. With the drop on the day, the Dow and the S&P 500 pulled back off yesterday's record closing highs.

The major averages ended the session just off their worst levels of the day. The Dow dipped 61.85 points or 0.3 percent to 21,467.14, the Nasdaq slid 50.98 points or 0.8 percent to 6,188.03 and the S&P 500 fell 16.43 points or 0.7 percent to 2,437.03.

The pullback by stocks came amid a sharp drop by the price of crude oil, with crude for July delivery tumbling $0.97 to $43.23 a barrel, the lowest closing level for a front-month contract since last September.

The drop pulled crude oil into bear territory, as the price is down by nearly 22 percent compared to the 52-week high of $55.24 a barrel hit in early January.

Concerns about oversupply weighed on the price of crude oil amid indications of rising production in Nigeria and Libya.

Overall trading activity remained somewhat subdued, however, with a lack of major U.S. economic data keeping some traders on the sidelines.

Reports on new and existing home sales and leading economic indicators may attract some attention in the coming days.

Among individual stocks, shares of Chipotle Mexican Grill (CMG) came under pressure after the restaurant chain forecast higher operating costs as a percentage of sales in the second quarter.

Teladoc also posted a notable loss after the virtual health solutions provider agreed to acquire privately held Best Doctors for $440 million in cash and stock.

On the other hand, shares of Parexel (PRXL) moved notably higher after the drug research firm agreed to be acquired by Pamplona Capital Management for $88.10 per share in cash or $5 billion including debt.

Sector News

Energy stocks saw significant weakness amid the steep drop in oil prices but ended the session well off their worst levels of the day.

Reflecting the weakness in the energy sector, the Philadelphia Oil Service Index plunged by 2.3 percent, while the NYSE Arca Oil & Gas Index and the NYSE Arca Natural Gas Index fell by 1.7 percent and 1.3 percent, respectively.

Considerable weakness also emerged among transportation stocks, as reflected by the 1.8 drop by the Dow Jones Transportation Average. The average pulled back off its best closing level in well over three months.

Steel, telecom, and electronic storage stocks also saw notable weakness on the day, moving lower along with most of the other major sectors.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region turned in a mixed performance during trading on Tuesday. Japan's Nikkei 225 Index advanced by 0.8 percent, while Hong Kong's Hang Seng Index fell by 0.3 percent.

Meanwhile, the major European markets turned lower over the course of the trading day. While the French CAC 40 Index dipped by 0.3 percent, the German DAX Index and the U.K.'s FTSE 100 Index slid by 0.6 percent and 0.7 percent, respectively.

In the bond market, treasuries moved back to the upside following the drop seen in the previous session. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, dropped 3.7 basis points to 2.153 percent.

Looking Ahead

Following a couple of quiet days on the U.S. economic front, trading on Wednesday may be impacted by reaction to a report on existing home sales in the month of May.

Additionally, Adobe Systems (ADBE) and FedEx (FDX) are among the companies releasing their quarterly results after the close of today's trading.