Stocks See Additional Selling Pressure In Early Afternoon Trading - U.S. Commentary

(RTTNews) - As investors look over a government report on pending home sales, stocks are showing notable weakness in early afternoon trading on Tuesday. The disappointing data has prompted investors to lock in profits from the standout gains seen in the previous session.

Earlier in the day, National Association of Realtors released a key report on pending home sales. In the report, the NAR said that that pending home sales fell by 3.2 percent in July following an upwardly revised 5.8 percent increase in June, much lower than economists were expecting.

Economists had expected pending home sales to fall by 1.4 percent compared to the 5.3 percent increase originally reported for the previous month.

Noting that home sales continue to edge up and down, NAR chief economist Lawrence Yun said, “Pending home sales are oscillating month-to-month, with the long-term trend essentially flat.”

Commenting on the data, Peter Boockvar, equity strategist at Miller Tabak, stated that the housing data could be perceived as “old news.” He added, “But, the key will be whether a 50bps cut in interest rates (assuming it’s sustainable) will be enough to bring out the buyers or further lower prices are going to be needed. A combination of both will likely be the answer.”

Meanwhile, a sharp drop in Lehman Brothers (LEH) is also contributing to the weakness on Wall Street. Shares of the investment bank are down 35.8 percent on reports that a Korean state run bank is no longer in talks about an investment in Lehman Brothers.

In other news, Pfizer (PFE) said Tuesday morning that it will withdraw all marketing applications globally for its skin treatment drug dalbavancin and conduct an additional Phase 3 clinical trial for the antibiotic following feedback from regulatory authorities. The withdrawal includes the U.S. new drug application and the European marketing authorization application.

In recent trading, the major averages remain sharply lower. The Dow is currently down 95.75 at 11,414.99, the Nasdaq is down 20.71 at 2,249.05 and the S&P 500 is down 17.87 at 1,249.92.

Sector News

Resource stocks are turning in some of the worst performances, hurt by a drop in commodity prices. Within the resource sector, gold and steel stocks are among the biggest decliners. The Amex Gold Bugs Index is down 5.1 percent, while the Amex Steel Index is falling 5.3 percent.

Oil and oil service stocks are lower as well, as the price of oil falls $2.52 to $103.82 a barrel. The weakness in crude oil prices comes amid indications that OPEC will leave production unchanged at its meeting. Traders are also betting that Hurricane Ike will miss the major oil areas in the Gulf of Mexico.

The Philadelphia Oil Service Index is down 3.4 percent, extending a nearly two-week downtrend. Earlier in the session, the index set a seven-month intraday low. The Amex Oil Index is down 3.8 percent after setting a yearly intraday low. The Amex Oil Index has been trending lower for the past seven sessions.

The financial sector is also showing considerable weakness, including bank and brokerage stocks. Lehman Brothers is leading the sector lower as investors worry that the investment bank is having a hard time shoring up its balance sheet. The S&P Bank Index is down 3.4 percent, while the Amex Securities Broker/Dealer Index is falling 6.6 percent.

Washington Mutual (WM) is also among the notable decliners within the financial sector. On Monday, the bank announced that Alan Fishman has been appointed as the company’s chief executive officer succeeding Kerry Killinger, who is leaving the company after serving as chief executive officer since 1990. Shares of Washington Mutual are down 18.7

Other stocks that are showing notable weakness include railroad, housing and semiconductor stocks. The Dow Jones Railroad Index is down 4.2 percent, the Philadelphia Housing Index is down 5.1 percent and the Philadelphia Semiconductor Index is down 2.1 percent.

Stocks In The News

Among individual stocks, HB Fuller (FUL) is seeing significant selling pressure after the company lowered its earnings outlook for fiscal year 2008, mainly due to the ongoing negative impact from rapidly rising costs of raw materials. HB Fuller now expects to see full year net income of $1.55 to $1.60 per share, much lower than analyst’s estimates of $1.80 per share.

Shares of the specialty chemicals maker are currently trading lower by 11.1 percent, taking back the gains posted in the previous two sessions. On Monday, the stock set a nine-month closing high.

Wachovia (WB) is also posting a substantial loss. Late Monday, Wachovia announced that it has appointed David K. Zwiener as its chief financial officer, effective Oct. 1st. The announcement prompted Merrill Lynch to downgrade the stock to an Underperform rating. The stock is down 10.8 percent, although it has moved well off of its intraday low.

On the other hand, McDonald’s (MCD) is showing considerable strength after the company reported 8.5 growth in its global comparable sales for the month of August, helped by its popular breakfast menu, Olympic-related marketing, and extended hours. U.S. comparable sales rose 4.5 percent in August. Shares of the fast food chain operator are up 2.4 percent, adding to a substantial gain in the previous session.

Other Markets

Stock markets across the Asia-Pacific region closed sharply lower Tuesday, as traders did some profit taking following Monday’s rally. The Japanese Nikkei 225 average closed down 1.8 percent.

The major European markets also ended the session lower after trading in a mixed fashion earlier in the day. The French CAC 40 Index closed down 1.1 percent, while the German DAX Index ended the session 0.5 percent lower. The U.K.’s FTSE 100 Index finished the day down 0.6 percent.

Meanwhile, treasuries have seen further buying interest in early afternoon trading. Subsequently, the yield on the ten-year note is currently down 5.4 basis points at 3.611 percent.

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