Stocks Close Notably Lower Following Volatile Trading Day - U.S. Commentary

(RTTNews) - Stocks saw substantial volatility over the course of the trading session on Tuesday before ending the day notably lower. The losses on the day extended the downward trend shown by the markets over the past several sessions.

The major averages saw further downside going into the close, finishing the session at their worst levels of the day. The Dow fell 111.97 points or 0.7 percent to 17,068.87, the Nasdaq tumbled 57.32 points or 1.2 percent to 4,547.83 and the S&P 500 slid 16.89 points or 0.9 percent to 1,972.74.

The volatility seen on Wall Street throughout the day came as traders reacted to significant fluctuations by the price of crude oil.

After falling to a new five-year low of $53.60 a barrel, crude for January delivery rebounded to a high of $57.15 a barrel before pulling back and closing up just $0.02 at $55.93 a barrel.

The recent sell-off by the price of crude oil has raised concerns about the outlook for the oil and gas industry, which had been a major source of growth for the U.S. economy.

The choppy trading also came as traders looked ahead to the Federal Reserve's highly anticipated monetary policy announcement on Wednesday.

The Fed is widely expected to leave interest rates unchanged, but traders will be paying close attention to whether the central bank reiterates its intention to keep rates at low levels for a "considerable time."

Along with the statement, the Fed's updated economic forecasts could also impact the outlook for future rate hikes.

On the economic front, the Commerce Department released a report before the start of trading showing a drop in new residential construction in the month of November.

The report said housing starts fell 1.6 percent to a seasonally adjusted annual rate of 1.028 million in November from the revised October estimate of 1.045 million.

Economists had expected housing starts to climb to a rate of 1.038 million from the 1.009 million originally reported for the previous month.

Building permits, an indicator of future housing demand, tumbled 5.2 percent to an annual rate of 1.035 million in November from the revised October rate of 1.092 million.

Sector News

While most of the major sectors fluctuated over the course of the trading session, airline stocks saw significant weakness throughout the day. The NYSE Arca Airline Index subsequently tumbled by 3.5 percent to its lowest closing level in a month.

Brazil's GOL (GOL), Copa Holdings (CPA) and American Airlines (AAL) turned in some of the airline sector's worst performances.

Software stocks also moved sharply lower on the day, dragging the Dow Jones Software Index down by 2.1 percent. With the drop, the index fell to a nearly two-month closing low.

Considerable weakness was also visible among gold stocks, as reflected by the 1.8 percent loss posted by the NYSE Arca Gold Bugs Index. The weakness in the sector came as gold for February delivery slid $13.40 to $1,194.30 an ounce.

Internet, electronic storage, and retail stocks also saw notable weakness on the day, while significant strength was visible among energy stocks.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved mostly lower during trading on Tuesday. Japan's Nikkei 225 Index plummeted by 2 percent, while Hong Kong's Hang Seng Index tumbled by 1.6 percent.

Meanwhile, the major European markets moved sharply higher over the course of the session. While the French CAC 40 Index jumped by 2.2 percent, the U.K.'s FTSE 100 Index and the German DAX Index soared by 2.4 percent and 2.6 percent, respectively.

In the bond market, treasuries moved notably higher on the day, more than offsetting the modest pullback seen in the previous session. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, fell by 4.5 basis points to 2.071 percent.

Looking Ahead

While the Fed's policy decision is likely to be in the spotlight on Wednesday, traders will also be presented with the Labor Department's report on consumer price inflation.

Additionally, FedEx (FDX) and General Mills (GIS) are due to report their quarterly results before the start of trading.