Earnings Anxiety Leads To Notable Weakness On Wall Street - U.S. Commentary

(RTTNews) - After moving mostly lower over the course of the previous session, stocks saw further downside during trading on Tuesday. With the losses on the day, the Dow and the S&P 500 pulled back further off last week's record highs.

The major averages all closed firmly in the red, although the tech-heavy Nasdaq underperformed its counterparts. While the Nasdaq plummeted 60.07 points or 1.4 percent to 4,391.46, the Dow dropped 117.59 points or 0.7 percent to 16,906.62 and the S&P 500 slid 13.94 points or 0.7 percent to 1,963.71.

Trepidation ahead of the start of earnings season contributed to the weakness on Wall Street, with Alcoa (AA) releasing its second quarter results after the close of trading.

While Alcoa was dropped from the list of Dow components last year, the release of quarterly results from the aluminum giant is still seen as the unofficial start of earnings season.

Wells Fargo (WFC), Family Dollar (FDO), and WD-40 (WDFC) are also due to release their quarterly results later in the week, although the reporting season won't really start to pick up steam until next week.

Lingering concerns about the outlook for monetary policy also led some traders to cash in on the recent strength in the markets.

Recent upbeat economic data, including last week's strong jobs report, has led to speculation that the Federal Reserve will begin raising interest rates sooner than anticipated.

Meanwhile, traders largely shrugged off mixed remark by Richmond Fed President Jeffrey Lacker and Minneapolis Fed President Narayana Kocherlakota.

Lacker, a policy hawk, said inflation has bottomed out and is moving toward the Fed's target and predicted moderate economic growth.

On the other hand, the more dovish Kocherlakota said he does not expect the drop in the unemployment rate to be sustained and called the firmer inflation "temporary."

Sector News

Technology stocks saw substantial weakness on the day, contributing to the particularly steep loss posted by the tech-heavy Nasdaq.

Within the tech sector, internet stocks turned in some of the worst performances, dragging the Dow Jones Internet Index down by 3 percent. The drop pulled the index down further off the three-month closing high it set last Thursday.

Twitter (TWTR) helped to lead the internet sector lower, with the social media giant extending the pullback seen over the past few sessions with a 7 percent loss.

Electronic storage and networking stocks also saw considerable weakness, with the NYSE Arca Disk Drive Index and the NYSE Arca Networking Index tumbling by 2.6 percent and 2.2 percent, respectively.

Outside of the tech sector, brokerage, banking and defense stocks also saw notable weakness, while gold stocks bucked the downtrend by the broader markets.

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 fell by 0.4 percent, while China's Shanghai Composite Index crept up by 0.2 percent.

Meanwhile, the major European markets saw significant weakness on the day. While the U.K.'s FTSE 100 Index tumbled by 1.3 percent, the French CAC 40 Index and the German DAX Index both plunged by 1.4 percent.

In the bond market, treasuries extended yesterday's upward move amid the continued weakness on Wall Street. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, fell by 5.2 basis points to 2.565 percent.

Looking Ahead

While early trading on Wednesday may be impacted by reaction to Alcoa's quarterly results, the minutes of the latest Fed meeting are likely to be in the spotlight later in the session.