Stocks moved sharply lower over the course of the trading day on Tuesday after moving moderately higher in morning trading. Lingering concerns about the global economic outlook weighed on the markets, overshadowing upbeat U.S. consumer confidence data.
The major averages ended the day firmly in negative territory, at their worst levels of the session. The Dow fell 101.37 points or 0.8 percent to 13,457.55, the Nasdaq tumbled 43.05 points or 1.4 percent to 3,117.73 and the S&P 500 slid 15.30 points or 1.1 percent to 1,441.49.
The early strength on Wall Street was partly due to the release of a report from the Conference Board showing a much bigger than expected improvement in U.S. consumer confidence during the month of September.
The Conference Board said its consumer confidence index jumped to 70.3 in September from a revised 61.3 in August. Economists had expected the index to climb to 64.8 from the 60.6 originally reported for the previous month.
The much bigger than expected increase lifted the consumer confidence index to its highest level since reaching 71.6 in February.
Buying interest remained relatively subdued, however, as traders worried about whether the outlook for the global economy supports further upside for the markets.
The subsequent pullback was partly due to comments by Philadelphia Federal Reserve President Charles Plosser, who warned that the Fed's recently announced third round of quantitative easing is not likely to do much to benefit growth or employment.
Plosser, who is not currently a voting member of the Fed's monetary policy committee, said a small drop in interest rates is not likely to overturn the strong desire to save and induce households to spend more.
"In fact, driving down interest rates even further may encourage consumers to save even more to make up for lower returns," Plosser said.
"Thus, in my view, we are unlikely to see much benefit to growth or to employment from further asset purchases," he added. "If I am right, then conveying the idea that such action will have a substantive impact on labor markets and the speed of the recovery risks the Fed's credibility."
Among individual stocks, shares of Staples (SPLS) came under pressure after the office supplies retailer announced that it is embarking on a strategic plan to better serve the needs of its customers and accelerate growth. Staples ended the day down by 4.5 percent.
Staples said it is accelerating the closure of approximately fifteen U.S. stores and plans to close 45 stores and several sub-scale delivery businesses in Europe.
Construction equipment maker Caterpillar (CAT) also posted a notable loss after cutting its guidance for 2015. The company said it now expects earnings of $12 to $18 per share compared to its previous forecast for earnings of $15 to $20 per share.
Meanwhile, shares of Vail Resorts (MTN) turned in a strong performance after the resort operator reported a narrower than expected fourth quarter loss on better than expected revenues. Vail surged up by 8.2 percent on the day.
Sector News
Reflecting concerns about the outlook for global demand, steel stocks moved sharply lower over the course of the trading day. The NYSE Arca Steel Index tumbled by 3.2 percent, pulling back further off the four-month closing high set earlier this month.
Steel Dynamics (STLD), Gerdau (GGB), and Timken (TKR) turned in some of the steel sector's worst performances on the day.
Considerable weakness also emerged among brokerage stock, as reflected by the 2.7 percent loss posted by the NYSE Arca Broker/Dealer Index. Knight Capital Group (KCG), Charles Schwab (SCHW), and E*Trade (ETFC) posted notable losses.
Electronic storage, semiconductor, and housing stocks also came under pressure as the day progressed, moving lower along with most of the major sectors.
Other Markets
In overseas trading, stock markets across the Asia-Pacific region turned in a mixed performance on Tuesday. Japan's Nikkei 225 Index crept up by 0.3 percent, while China's Shanghai Composite Index edged down by 0.2 percent.
Meanwhile, the major European markets all moved to the upside over the course of the trading day. While the German DAX Index inched up by 0.2 percent, the U.K.'s FTSE 100 Index and the French CAC 40 Index rose by 0.4 percent and 0.5 percent, respectively.
In the bond market, treasuries moved higher on the day, extending the upward move seen in recent sessions. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, fell by 3.6 basis points to 1.682 percent.
Looking Ahead
Trading on Wednesday could be impacted by the release of the Commerce Department's monthly report on new home sales, with economists expecting sales to climb to an annual rate of 380,000 in August from 372,000 in July. (RTT News)
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What my crystal ball is telling me is bumpy road down for almost all paper assets.Duration is difficult to guess two years perhaps.
Martin
Duh. After reading the above as a consumer I am now more confident than ever. I expect to be in the high 90's just before elections.
V
Love the headline: "Firmly Negative"!
I've been cautiously pessimistic for the last two weeks.
B