Stocks Close Roughly Flat After Seeing Early Downward Move - U.S. Commentary

(RTTNews) - After falling rather sharply in early trading on Tuesday, stocks staged a significant recovery over the course of the morning. Trading activity was somewhat subdued in the afternoon, however, resulting in a lackluster close by the markets.

The major averages ended the day mixed, with the tech-heavy Nasdaq posting a modest gain. While the Nasdaq inched up 3.27 points or 0.1 percent to 3,939.86, the Dow edged down 20.90 points or 0.1 percent to 15,618.22 and the S&P 500 dipped 4.96 points or 0.3 percent to 1,762.97.

The early weakness on Wall Street was partly due concerns about the global economy after the European Commission cut its growth outlook.

While the commission estimates Eurozone GDP to shrink 0.4 percent this year, unchanged from its previous estimate, the outlook for GDP growth next year was lowered to 1.1 percent from 1.2 percent.

However, the Institute for Supply Management released a separate report not long after the open showing that U.S. service sector activity expanded at a faster rate in October.

The ISM said its non-manufacturing index climbed to 55.4 in October from 54.4 in September, with a reading above 50 indicating growth in the service sector.

The modest increase came as a surprise to economists, who had been expecting the index to dip to a reading of 54.0.

While the report suggests that the government shutdown had a smaller impact on the economy than feared, the data also added to recent uncertainty about the outlook for monetary policy.

Among individual stocks, shares of GT Advanced Technologies (GTAT) moved sharply higher after the diversified technology company signed an agreement to supply equipment to tech giant Apple (AAPL).

Online media company AOL (AOL) also moved to the upside after reporting third quarter earnings and revenues that came in above analyst estimates.

Meanwhile, shares of LeapFrog (LF) came under pressure after the toy maker reported better than expected third quarter earnings but provided disappointing full-year guidance.

Sector News

While many of the major sectors ended the day showing only modest moves, substantial weakness was visible among electronic storage stocks. Reflecting the weakness in the storage sector, the NYSE Arca Disk Drive Index tumbled 3.4 percent to a four-month closing low.

Imation (IMN) helped to lead the storage sector lower, falling by 5.9 percent, while Hutchinson Technology (HTCH) and Quantum (QTM) also posted notable losses.

Housing stocks also saw significant weakness on the day, dragging the Philadelphia Housing Sector Index down by 1.8 percent.

Biotechnology, commercial real estate, and gold stocks also ended the day firmly in the red, while some strength emerged among networking stocks.

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 edged up by 0.2 percent, while Hong Kong's Hang Seng Index fell by 0.7 percent.

Meanwhile, the major European markets all moved to the downside on the day. While the French CAC 40 Index dropped by 0.8 percent, percent, the U.K.'s FTSE 100 Index and the German DAX Index both ended the day down by 0.3 percent.

In the bond market, treasuries moved notably lower on the heels of the upbeat service sector data. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, rose by 6 basis points to 2.662 percent.

Looking Ahead

While the Conference Board is due to release its report on leading economic indicators in the month of September on Wednesday, the data is not likely to attract much attention.

Traders are likely to be looking ahead to the release of the third quarter GDP report on Thursday as well as the release of the October jobs report on Friday.