Stocks Firmly Negative Amid Renewed Fed Worries - U.S. Commentary

(RTTNews) - After moving moderately lower in early trading on Tuesday, stocks have seen some further downside over the course of the trading session. Renewed worries about the outlook for the Federal Reserve's stimulus program are weighing on the markets.

The major averages have recently climbed off their worst levels of the day but remain firmly negative. The Dow is down 98.19 points or 0.6 percent at 15,513.94, the Nasdaq is down 29.18 points or 0.8 percent at 3,663.77 and the S&P 500 is down 10.20 points or 0.6 percent at 1,696.94.

The weakness on Wall Street comes as upbeat data on the U.S. trade deficit and comments from a Fed official have led to renewed concerns about the central bank's asset purchase program.

Before the start of trading, the Commerce Department released a report showing that the trade deficit narrowed by much more than expected in the month of June.

The report said the trade deficit narrowed to $34.2 billion in June from a revised $44.1 billion in May, while economists had expected the deficit to narrow to $43.0 billion.

Paul Ashworth, Chief U.S. Economist at Capital Economics said the narrower than expected trade deficit suggests that second quarter GDP growth was significantly stronger than the preliminary estimate of 1.7 percent.

A substantial upward revision to pace of GDP growth in the second quarter could indicate to the Fed that the economy is on firmer footing and capable of handling a tapering of its asset purchase program.

Adding to the worries about the Fed's stimulus program, Atlanta Fed President Dennis Lockhart told Market News International that the decision to begin scaling back bond purchases could come at any of the three remaining policy meetings this year.

The Fed's next monetary policy meeting is scheduled for September, and many economists have suggested that is when the central bank will start to taper.

Lockhart, who is not a voting member of the Fed's monetary policy setting committee, noted that he'll be closely watching the incoming economic data for "the next few weeks."

Sector News

Gold stocks have shown a substantial move to the downside on the day, dragging the NYSE Arca Gold Bugs Index down by 4.4 percent. With the drop, the index has pulled back to its lowest intraday level in almost a month.

The weakness among gold stocks comes amid a decrease by the price of the precious metal, with gold for December delivery sliding $16 to $1,286.40 an ounce.

Significant weakness has also emerged among airline stocks, as reflected by the 2.5 percent loss being posted by the NYSE Arca Airline Index. United Continental (UAL) has helped to lead the sector lower, falling by 4.7 percent.

Housing stocks are also seeing considerable weakness in mid-day trading, with the Philadelphia Housing Sector Index down by 1.9 percent. Radian Group (RDN) and PulteGroup (PHM) are posting steep losses.

Most of the other major sectors have also moved to the downside, with notable weakness visible among oil service, biotechnology, and steel stocks.

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 advanced by 1 percent, while Hong Kong's Hang Seng Index tumbled by 1.3 percent.

Meanwhile, the major European markets all came under pressure on the day. While the German DAX Index dropped by 1.3 percent, the French CAC 40 Index and the U.K.'s FTSE 100 Index fell by 0.4 percent and 0.2 percent, respectively.

In the bond market, treasuries are seeing modest weakness but have climbed off their lows for the session. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, is up by 1.5 basis points at 2.655 percent.