U.S. Stocks Close Firmly Negative After Initial Move To The Upside

(RTTNews) - Stocks moved to the upside at the start of trading on Tuesday but came under pressure over the course of the session. The major averages pulled back well off their early highs and slid firmly into negative territory as the day progressed.

After snapping a five-session losing streak on Monday, the Dow slid 292.06 points or 0.8 percent to 34,577.57, its lowest closing level in almost two months. The S&P 500 fell 25.68 points or 0.6 percent to 4,443.05, while the Nasdaq dropped 67.82 points or 0.5 percent to 15,037.76, closing lower for the fifth straight session.

Stocks initially benefited from a positive reaction to a highly anticipated Labor Department report showing consumer prices increased by slightly less than expected in the month of August.

The Labor Department said its consumer price index rose by 0.3 percent in August after climbing by 0.5 percent in July. Economists had expected consumer prices to increase by 0.4 percent.

Excluding food and energy prices, core consumer prices inched up by just 0.1 percent in August after rising by 0.3 percent in July. Economists had been expecting another 0.3 percent increase.

The report also showed a slowdown in the annual rate of consumer price growth, which dipped to 5.3 percent in August from 5.4 percent in July.

The annual rate of core consumer price growth also slowed to 4.0 percent in August from 4.3 percent in the previous month.

The relatively tame inflation data initially generated optimism that the Federal Reserve may delay plans to begin scaling back stimulus.

However, subsequent comments from economists suggested that the Fed is still likely to begin tapering its asset purchases as soon as December.

The Fed is scheduled to hold a monetary policy meeting next week, with many expecting the central bank to provide an update on the outlook for its asset purchase program.

Sector News

Steel stocks showed a substantial move to the downside on the day, dragging the NYSE Arca Steel Index down by 2.1 percent to its lowest closing level in almost two months.

Significant weakness was also visible among banking stocks, as reflected by the 2 percent slump by the KBW Bank Index.

Oil service stocks also saw considerable weakness on the day, resulting in a 2 percent drop by the Philadelphia Oil Service Index. The weakness in the sector came as the price of crude oil ended the day nearly flat.

Tobacco, natural gas and housing stocks also showed notable moves to the downside, moving lower along with most of the other major sectors.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region turned in a mixed performance during trading on Tuesday. Japan's Nikkei 225 Index advanced by 0.7 percent, while China's Shanghai Composite Index tumbled by 1.4 percent.

The major European markets also ended the day mixed. While the German DAX Index inched up by 0.1 percent, the French CAC 40 Index and the U.K.'s FTSE 100 Index fell by 0.4 percent and 0.5 percent, respectively.

In the bond market, treasuries moved notably higher following the consumer price inflation data. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, slid 4.7 basis points to 1.277 percent.

Looking Ahead

A Fed report on industrial production may attract attention on Wednesday along with separate reports on import and export prices and New York manufacturing activity.