Stocks Fall Sharply On Disappointing Earnings News, Data - U.S. Commentary

(RTTNews) - After moving sharply lower at the start of trading on Tuesday, stocks remained stuck firmly in negative territory throughout the trading session. The losses on the day more than offset Monday's modest gains, with the Nasdaq snapping its six-day winning streak.

The major averages ended the session off their worst levels of the day but still posted steep losses. The Dow tumbled 291.49 points or 1.7 percent to 17,387.21, the Nasdaq plunged 90.27 points or 1.9 percent to 4,681.50 and the S&P 500 slumped 27.54 points or 1.3 percent to 2,029.55.

A negative reaction to earnings news from several big-name companies contributed to the initial sell-off on Wall Street.

Shares of Microsoft (MSFT) showed a particularly steep drop after the software giant reported second quarter earnings that matched analyst estimates but provided disappointing guidance. Microsoft plummeted 9.3 percent on the day.

Caterpillar (CAT), Procter & Gamble (PG) and DuPont (DD) also moved to the downside after reporting their quarterly results.

Negative sentiment was also generated by a report from the Commerce Department showing a substantial decrease in durable goods orders in the month of December.

The report said durable goods orders tumbled by 3.4 percent in December following a revised 2.1 percent decrease in November.

Economists had expected durable goods orders to increase by 0.5 percent compared to the 0.7 percent drop originally reported for the previous month.

Excluding a sharp drop in orders for transportation equipment, durable goods orders fell by a more modest 0.8 percent in December compared to a 1.3 percent decrease in November.

Meanwhile, traders largely seemed to shrug off a pair of upbeat reports on new home sales and consumer confidence.

A report from the Commerce Department showed that new home sales jumped to their highest annual rate in over six years in December, while the Conference Board said its consumer confidence index surged up to a seven-year high in January.

Sector News

With Microsoft leading the way lower, software stocks saw substantial weakness on the day. Reflecting the weakness in the sector, the Dow Jones Software Index plunged by 5.1 percent.

Along with Microsoft, CA Technologies (CA) and Symantec (SYMC) also posted notable losses, falling by 3 percent and 2.4 percent, respectively.

Significant weakness was also visible among semiconductor stocks, as reflected by the 1.9 percent loss posted by the Philadelphia Semiconductor Index. Industry giant Intel (INTC) turned in one of the sector's worst performances, tumbling by 4.5 percent.

Internet, computer hardware, telecom, and transportation stocks also saw considerable weakness, moving lower along with most of the other major sectors.

Meanwhile, gold stocks were among the few groups to buck the downtrend, with the NYSE Arca Gold Bugs Index jumping by 3.8 percent. The strength in the sector came as gold for February delivery climbed $12.30 to $1,291.70 an ounce.

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 surged up by 1.7 percent, while Hong Kong's Hang Seng Index fell by 0.4 percent.

Meanwhile, the major European markets all moved to the downside on the day. While the U.K.'s FTSE 100 Index dropped by 0.6 percent, the French CAC 40 Index slumped by 1.1 percent and the German DAX Index tumbled by 1.6 percent.

In the bond market, treasuries ended the day nearly flat after failing to sustain an early rally. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, edged down by less than a basis point to 1.825 percent after hitting a low of 1.75 percent.

Looking Ahead

The Federal Reserve is likely to take center stage on Wednesday, as the central bank is scheduled to announce its latest monetary policy decision.

While the Fed is widely expected to leave interest rates unchanged, traders are likely to keep a close eye on any changes to the accompanying statement.

Ahead of the announcement, trading could be impacted by reaction to earnings news from Apple (AAPL), AT&T (T), and Yahoo (YHOO), which are releasing their quarterly results after the close of today's trading.