Stocks Remain Firmly Negative In Mid-Day Trading - U.S. Commentary

(RTTNews) - With worries about the global economic outlook generating considerable selling pressure, stocks have moved notably lower during trading on Tuesday. The steep losses on the day have further offset the rally that was seen last Friday.

Currently, the major averages are off their worst levels of the day but remain firmly in the red. The Dow is down 131.90 points or 0.8 percent at 16,860.01, the Nasdaq is down 27.77 points or 0.6 percent at 4,427.04 and the S&P 500 is down 11.97 points or 0.6 percent at 1,952.85.

The weakness on Wall Street is partly due to the release of more disappointing German economic data following yesterday's much weaker than expected reading on German factory orders.

A report released by the German Federal Statistical Office showed that German industrial output fell 4 percent in August, much steeper than the 1.5 percent drop expected by economists.

The sharp pullback, which came on the heels of a 1.6 percent increase in July, pushed the annual growth rate back into negative territory for the first time since July of 2013.

Jonathan Loynes, chief European economist at Capital Economics, said the data "all but confirmed that German industry is back in recession and underlined the need for both the ECB and the German Government to give the euro-zone's biggest economy much more policy support."

Adding to the worries about the global economy, the International Monetary Fund downgraded its global growth forecast for both this year and next.

Describing the global economic recovery as weak and uneven, the IMF said it now expects global growth to average 3.3 percent in 2014, down from 3.4 percent in July. The group also lowered its growth forecast for 2015 to 3.8 percent from 4.0 percent.

Traders also continue to express concerns about the outlook for U.S. monetary policy ahead of the release of the minutes of the latest Federal Reserve meeting on Wednesday.

With the Fed set to wrap up its asset purchase program later this month, traders know that it is likely only a matter of time before the central bank starts raising interest rates.

Sector News

After ending the previous session notably higher, gold stocks have shown a significant move back to the downside on the day. The NYSE Arca Gold Bugs Index has fallen by 2.4 percent to its worst intraday level in over nine months.

The pullback by gold stocks comes despite a continued recovery by the price of the precious metal, as gold for December delivery is climbing $3.70 to $1,211 an ounce.

Pharmaceutical stocks are also seeing considerable weakness in mid-day trading, with the NYSE Arca Pharmaceutical Index down by 1.5 percent. Steep losses by Novartis (NVS) and Bristol-Myers (BMY) have helped drag the index down to a one-month low.

Notable weakness is also visible among transportation stocks, resulting in a 1.2 percent drop by the Dow Jones Transportation Average.

While most of the other major sectors have also come under pressure on the day, oil service stocks are bucking the downtrend following some positive analyst comments.

Other Market

In overseas trading, stock markets across the Asia-Pacific region turned in another mixed performance during trading on Tuesday. Japan's Nikkei 225 Index fell by 0.7 percent, while Hong Kong's Hang Seng Index advanced by 0.5 percent.

Meanwhile, the major European markets all showed notable moves to the downside on the day. While the French CAC 40 Index plunged by 1.8 percent, the German DAX Index tumbled by 1.3 percent and the U.K.'s FTSE 100 Index slumped by 1 percent.

In the bond market, treasuries have moved notably higher amid the global economic concerns. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, is down by 5 basis points at 2.375 percent.