U.S. Stocks Give Back Ground Following Recent Strength

Stocks moved to the downside during trading on Tuesday, giving back ground after ending the previous session mostly higher. Selling pressure remained relatively subdued, however, allowing the major averages to hang on to the bulk of their recent gains.

The major averages all finished the day in the red, with the tech-heavy Nasdaq posting a more notably loss. While the Nasdaq slid 84.55 points or 0.6 percent to 14,199.98, the S&P 500 dipped 9.19 points or 0.2 percent to 4,538.19 and the Dow slipped 62.75 points or 0.2 percent to 35,088.29.

The pullback on Wall Street came as some traders looked to cash in on the recent strength in the markets, which has lifted the major averages to their best levels in over three months.

A negative reaction to some of the latest earnings news from major retailers also weighed on Wall Street, with shares of American Eagle Outfitters (AEO) plummeting by 15.8 percent.

The steep drop by American Eagle came even though the apparel and accessories retailer reported fiscal third quarter results that exceeded analyst estimates on both the top and bottom lines.

Department store operator Kohl’s (KSS) also showed a steep drop after reporting fiscal third quarter revenues that fell short of analyst estimates.

Lowe’s (LOW) and Best Buy (BBY) also moved to the downside after both companies reported weaker than expected fiscal third quarter revenues and lowered their full-year sales forecasts.

Meanwhile, shares of Dick’s Sporting Goods (DKS) jumped after the sporting goods retailer reported better than expected fiscal third quarter results and raised its full-year guidance.

The markets did not show much reaction to the minutes of the Federal Reserve’s latest monetary policy meeting, which said Fed officials expect to keep interest rates at a restrictive level for “some time.”

The minutes of the October 31-November 1 meeting said participants agreed policy should remain restrictive until inflation is clearly moving down sustainably toward the Fed’s 2 percent objective.

Following the recent series of interest rate hikes, participants also agreed to proceed carefully and take a data-dependent approach to future policy decisions.

“Participants noted that further tightening of monetary policy would be appropriate if incoming information indicated that progress toward the Committee’s inflation objective was insufficient,” the Fed said.

The Fed also said participants expect data arriving in coming months to help clarify the extent to which the disinflation process was continuing.

“Markets showed little reaction since the minutes did not contain any major surprises,” Jeffrey Roach, Chief Economist for LPL Financial. “The Fed will keep talking tough on inflation as they patiently wait for the full effects of previous rate hikes.”

Sector News

Airline stocks showed a substantial move back to the downside, with the NYSE Arca Airline Index tumbling by 2.7 percent after ending Monday’s trading at a two-month closing high.

Significant weakness was also visible among semiconductor stocks, as reflected by the 1.9 percent slump by the Philadelphia Semiconductor Index. The index finished Monday’s session at its best closing level in well over three months.

Computer hardware, oil and banking stocks also saw considerable weakness on the day, while gold stocks moved sharply higher along with the price of the precious metal.

With gold for December delivery surging $21.30 to $2001.60 an ounce, the NYSE Arca Gold Bugs Index shot up by 2.6 percent.

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 edged down by 0.1 percent, while South Korea’s Kospi advanced by 0.8 percent.

Meanwhile, the major European markets all moved slightly lower on the day. While the German DAX Index closed just below the unchanged line, the U.K.’s FTSE 100 Index and the French CAC 40 Index both dipped by 0.2 percent.

In the bond market, treasuries showed a lack of direction before ending the session roughly flat. The yield on the benchmark ten-year note, which moves opposite of its price, slipped less than a basis point to 4.418 percent.

Looking Ahead

Reports on durable goods orders and weekly jobless claims may impact trading on Wednesday along with earnings news from Nvidia (NVDA), which is due to report its fiscal third quarter results after the close of today’s trading.

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