Stocks Close At Worst Levels Of The Day - U.S. Commentary

(RTTNews) - Stocks moved mostly lower over the course of the trading day on Tuesday after experiencing choppy trading early in the session. The drop on the day extended the notable downward move that was seen in the previous session.

The major averages saw further downside going into the close, ending the session at their worst levels of the day. The Dow tumbled 116.81 points or 0.7 percent to 17,055.87, the Nasdaq fell 19.00 points or 0.4 percent to 4,508.69 and the S&P 500 slid 11.52 points or 0.6 percent to 1,982.77.

With the losses, the Dow pulled back further off last Friday's record closing high, while the Nasdaq and the S&P 500 hit their worst closing levels in over a month.

The weakness that emerged on Wall Street was partly due to news that the U.S. Treasury Department is taking targeted action to reduce the tax benefits of corporate tax inversions.

The Treasury claimed that companies are increasingly using a technique of inversion in which a U.S. based multinational restructures so that the U.S. parent is replaced by a foreign corporation in order to avoid U.S. taxes.

Treasury Secretary Jack Lew said the action will significantly diminish the ability of inverted companies to escape U.S. taxation.

Geopolitical concerns also weighed on the markets amid news that the U.S. has expanded its military campaign against the Islamic State into Syria for the first time.

U.S. Central Command said U.S. military forces and partner nations attacked the terrorists in Syria using a mix of fighters, bombers, remotely piloted aircraft and Tomahawk Land Attack Missiles.

A statement from President Obama highlighted the fact that the U.S. was joined in the attack by Saudi Arabia, the United Arab Emirates, Jordan, Bahrain, and Qatar.

Disappointing economic news from Europe also generated some negative sentiment, with a report from Markit showing that private sector activity in the eurozone expanded at the slowest rate in 9 months.

Markit said the composite purchasing managers' index eased to 52.3 in September from 52.5 in August, while the index was expected to remain unchanged.

Meanwhile, a separate report from Markit and HSBC showed a modest acceleration in Chinese manufacturing activity in September.

Sector News

Adding to the losses posted in two previous sessions, airline stocks turned in some of the market's worst performances on the day. The NYSE Arca Airline Index fell by 1.4 percent to its worst closing level in over a month.

Hawaiian Airlines parent Hawaiian Holdings (HA) and Avianca Holdings (AVH) posted steep losses on the day, falling by 2.8 percent and 3.4 percent, respectively.

Considerable weakness was also visible among defense stocks, as reflected by the 1.2 percent loss posted by the Philadelphia Defense Sector Index. The drop pulled the index down to a one-month closing low.

Tobacco, networking, and software stocks also saw notable weakness, while most of the other major sectors showed more modest moves to the downside.

On the other hand, gold stocks bucked the downtrend, resulting in a 2 percent gain by the NYSE Arca Gold Bugs Index. The strength in the sector came as gold for December rose $4.10 to $1,222 an ounce.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region turned in a mixed performance on Tuesday. China's Shanghai Composite Index advanced by 0.9 percent, while Hong Kong's Hang Seng Index dropped by 0.5 percent. The Japanese markets were closed for a holiday.

Meanwhile, the major European markets all showed notable moves to the downside on the day. While the French CAC 40 Index plummeted by 1.9 percent, the German DAX Index and the U.K.'s FTSE 100 Index tumbled by 1.6 percent and 1.4 percent, respectively.

In the bond market, treasuries moved moderately higher, extending their recovery from last week's lows. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, fell by 3.1 basis points to 2.535 percent.

Looking Ahead

Following today's lack of major U.S. economic data, trading on Wednesday may be impacted by the Commerce Department's report on new home sales.