Stocks Close Mixed After Recovering From Initial Weakness - U.S. Commentary

(RTTNews) - After coming under pressure in early trading on Tuesday, stocks showed a significant recovery over the course of the trading day. The major averages bounced well off their worst levels of the day, with the Nasdaq climbing firmly into positive territory.

While the Nasdaq managed to end the day up 25.77 points or 0.5 percent at 4,766.47, the Dow and the S&P 500 closed modestly lower. The Dow slipped 51.28 points or 0.3 percent to 17,801.20, while the S&P 500 edged down 0.49 points or less than a tenth of a percent to 2,059.82.

The initial weakness on Wall Street was largely due to ongoing concerns about the global economic outlook amid a sell-off in the overseas markets.

China's Shanghai Composite Index showed a substantial move to the downside on the day, plummeting by 5.4 percent after reaching its highest intraday level in over three years.

The pullback by Chinese stocks came after the country's securities clearing house tightened collateral rules for short-term loans.

News that Greek Prime Minister Antonis Samaras has called for an early election for a new President also weighed on the European markets.

Peter Boockvar, managing director at the Lindsey Group, said, "It's mostly a symbolic position, but [the election] will be seen as a referendum on Samaras in a country where the uber-Socialist left Syriza party leads in the polls."

However, selling pressure waned not long after the open, as traders once again seemed reluctant to sell stocks and miss out on any further upside.

Traders subsequently used the early weakness to pick up stocks at reduced levels ahead of the release of some key U.S. economic data later in the week.

Among individual stocks, shares of Lululemon (LULU) showed a strong upward move on the day after Wells Fargo upgraded its rating on the yoga wear maker to outperform from market perform.

Auto parts retailer AutoZone (AZO) also turned in a strong performance after reporting better than expected first quarter results.

Meanwhile, shares of UTi Worldwide (UTIW) moved sharply lower after the supply chain services company reported a wider than expected third quarter loss.

Sector News

While many of the major sectors ended the day showing only modest moves, substantial strength was visible among gold stocks. Reflecting the strength in the gold sector, the NYSE Arca Gold Bugs Index surged up by 5 percent.

The gains by gold stocks came amid a sharp jump by the price of the precious metal, as gold for February soared $37.10 to $1,232 an ounce.

With the price of crude oil rebounding following yesterday's sell-off, energy stocks also moved to the upside on the day. The Philadelphia Oil Service Index jumped by 2.6 percent, while the NYSE Arca Natural Gas Index advanced by 1.8 percent.

Electronic storage and networking stocks also saw notable strength, contributing to the gain posted by the tech-heavy Nasdaq.

On the other hand, airline stocks saw considerable weakness on the day, dragging the NYSE Arca Airline Index down by 3.3 percent. With the loss, the index pulled back further off the twelve-year closing high set last Friday.

Spirit Airlines (SAVE) turned in one of the sector's worst performances, tumbling by 12.7 percent after Raymond James downgraded the stock to market perform from outperform.

Telecom, trucking, and pharmaceutical stocks also saw notable weakness, with Verizon (VZ) leading the telecom sector lower after warning of short-term pressure on profit margins.

Other Markets

As mentioned above, stock markets across the Asia-Pacific region moved mostly lower during trading on Tuesday. Japan's Nikkei 225 Index slumped by 0.7 percent, while Hong Kong's Hang Seng Index tumbled by 2.3 percent.

The major European markets also showed notable moves to the downside on the day. While the French CAC 40 Index plunged by 2.6 percent, the German DAX Index and the U.K.'s FTSE 100 Index plummeted by 2.2 percent and 2.1 percent, respectively.

In the bond market, treasuries moved higher amid the global stock market sell-off, extending the upward move seen on Monday. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, fell by 3.7 basis points to 2.22 percent.

Looking Ahead

Wednesday's trading may continue to be impacted by developments overseas amid another quiet day on the U.S. economic front.

Homebuilders may be in focus, however, as Hovnanian (HOV) and Toll Brothers (TOL) are both due to release their quarterly results before the start of trading.