Stocks Pull Back Sharply Along With Price Of Oil - U.S. Commentary

(RTTNews) - Once again following the price of crude oil, stocks moved sharply lower over the course of the trading day on Monday. The steep drop on the day partly offset the strong rebound that was seen to close out the previous week.

The major averages accelerated to the downside going into the close, ending the session just off their worst levels. The Dow slumped 208.29 points or 1.3 percent to 15,885.22, the Nasdaq plunged 72.69 points or 1.6 percent to 4,518.49 and the S&P 500 dove 29.82 points or 1.6 percent to 1,877.08.

A sharp pullback by the price of crude oil contributed to the weakness on Wall Street, with the commodity giving back ground after showing a strong upward move last week.

Crude oil for March delivery tumbled $1.85 or 5.7 percent to $30.34 a barrel after jumping $2.66 or 9 percent to $32.19 a barrel in the previous week.

Profit taking contributed to the decrease by the price of oil along with continued oversupply concerns after Iraq announced record production in December.

The sell-off may have been exaggerated by light trading activity, however, as some traders stayed on the sidelines amid a lack of major U.S. economic data on the day.

Several key economic events are scheduled for later this week, including the Federal Reserve's monetary policy announcement on Wednesday.

The Fed is widely expected to leave interest rates unchanged, but traders are likely to pay close attention to the accompanying statement.

Traders are also likely to keep an eye on some economic data due in the coming days, including reports on durable goods orders, fourth quarter GDP and new and pending home sales.

Earnings news is also likely to attract attention this week, with tech giants Apple (AAPL), Facebook (FB), and Microsoft (MSFT) among the slew of companies due to report their quarterly results.

Sector News

Energy stocks helped to lead the markets higher to close out the previous week but showed a substantial move back to the downside along with the price of crude oil.

The NYSE Arca Natural Gas Index plummeted by 8 percent, while the Philadelphia Oil Service Index tumbled by 5.3 percent and the NYSE Arca Oil & Gas Index slumped by 4.9 percent.

Significant weakness was also visible among electronic storage stocks, as reflected by the 4.1 percent loss posted by the NYSE Arca Disk Drive Index. With the drop, the index fell to its lowest closing level in well over six years.

SanDisk (SNDK) helped to lead the storage sector lower, plunging by 8.4 percent after CLSA downgraded its rating on the stock to Underperform from Outperform

Housing stocks also came under pressure, resulting in a 3.1 percent drop by the Philadelphia Housing Sector Index. D.R. Horton (DHI) posted a notable loss despite reporting better than expected first quarter earnings.

Financial, chemical, steel, and airline stocks also saw considerable weakness, while gold stocks bucked the downtrend amid an increase by the price of the precious metal.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved to the upside during trading on Monday. Japan's Nikkei 225 Index advanced by 0.9 percent, while Hong Kong's Hang Seng Index surged up by 1.4 percent.

Meanwhile, the major European markets ended the day in the red. While the French CAC 40 Index dropped by 0.6 percent, the U.K.'s FTSE 100 Index and the German DAX Index fell by 0.4 percent and 0.3 percent, respectively.

In the bond market, treasuries moved moderately higher, regaining ground following a recent pullback. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, slid 2.6 basis points to 2.022 percent.

Looking Ahead

Earnings news may attract some attention on Tuesday, as 3M (MMM), DuPont (DD), Johnson & Johnson (JNJ), and Sprint (S) are among the companies due to report their quarterly results before the start of trading.

Trading on the day could also be impacted by reaction to U.S. economic reports on home prices and consumer confidence.