U.S. Stocks Move To The Downside After Seeing Early Strength

(RTTNews) - After showing a significant rebound early in the session, stocks moved back to the downside over the course of the trading day on Tuesday. With the downturn on the day, the major averages added to the steep losses posted in the previous session.

The major averages climbed off their worst levels going into the close but remained in negative territory. The Dow dropped 87.72 points or 0.3 percent to 34,220.36, the Nasdaq fell 40.38 points or 0.3 percent to 13,371.57 and the S&P 500 dipped 15.08 points or 0.3 percent to 4,397.45.

The downturn on the day came as traders digested the Labor Department's highly anticipated report on consumer prices in the month of March.

While a spike in gasoline prices contributed to a jump in consumer prices, core prices increased by less than economists had expected.

The Labor Department said its consumer price index surged by 1.2 percent in March after climbing by 0.8 percent in February. The sharp increase in consumer prices matched economist estimates.

The jump in consumer prices came as gasoline prices skyrocketed by 18.3 percent, accounting for over half of the monthly increase.

With crude oil prices pulling back off their recent highs, Andrew Hunter, Senior U.S. Economist at Capital Economics, predicted the surge in energy prices will be partly reversed in April and said he expects energy inflation to decline significantly over the rest of this year.

Meanwhile, the report showed core consumer prices, which exclude food and energy prices, edged up by 0.3 percent in March after rising by 0.5 percent in February. Economists had expected another 0.5 percent increase.

The annual rate of consumer price growth accelerated to 8.5 percent in March from 7.9 percent in February, showing the fastest growth since December 1981.

Core consumer prices were up 6.5 percent year-over-year in March, reflecting an uptick from the 6.4 percent jump in February. The annual growth represents the biggest increase since August 1982.

"The surge in energy prices helped drive headline CPI inflation up to a new 40-year high of 8.5% in March but, with base effects set to become much more favorable and signs that monthly gains in core prices are moderating, we expect that to mark the peak," said Hunter.

Sector News

Banking stocks moved notably lower amid a pullback by treasury yields, dragging the KBW Bank Index down by 1.4 percent.

Significant weakness was also visible among pharmaceutical stocks, as reflected by the 1.2 percent drop by the NYSE Arca Pharmaceutical Index.

On the other hand, energy stocks rebounded along with the price of crude oil with crude for May delivery spiking $6.31 to $100.60 a barrel after plunging $3.97 to $94.29 a barrel on Monday.

Reflecting the strength in the energy sector, the Philadelphia Oil Service Index jumped by 2.6 percent and the NYSE Arca Oil Index climbed by 1.6 percent.

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 dove by 1.8 percent, while China's Shanghai Composite Index jumped by 1.5 percent.

Meanwhile, the major European markets all moved to the downside on the day. While the French CAC 40 Index dipped by 0.3 percent, the German DAX Index and the U.K.'s FTSE 100 Index fell by 0.5 percent and 0.6 percent, respectively.

In the bond market, treasuries regained ground after moving sharply lower in recent sessions. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, slid by 5.5 basis points to 2.725 percent.

Looking Ahead

Trading on Wednesday may be impacted by reaction to the Labor Department's report on producer price inflation in the month of March. The producer price index is expected to jump by 1.1 percent.