(RTTNews) - After showing a notable decline at the open, stocks have seen continued weakness over the course of the trading session on Wednesday. The major averages have all moved sharply lower, extending the downward move that was seen in the previous session.

Much of the weakness on Wall Street is due to the release of a report from the Commerce Department showing a bigger than expected drop in retail sales in September. The data has renewed concerns that the economy is headed for a deep recession despite recent government actions.

With the decrease due in large part to a 3.8 percent drop in sales by motor vehicle and parts dealers, retail sales fell by 1.2 percent in September following a revised 0.4 percent decrease in August. Economists had expected a more modest decrease in sales of about 0.7 percent.

Anika Khan, an economist at Wachovia said, “As consumers continue to contend with moderating income growth and a weak labor market, we do not expect a near term rebound.”

“The weakness in retail sales means that consumer spending will almost certainly decline in the coming quarters and could be a harbinger of real trouble this holiday season,” Kahn added.

While a separate report from the New York Federal Reserve showed a substantial deterioration in business conditions in the month of October, the Labor Department released a report showing a continued decrease in producer prices in September.

In an interview with RTT News, Craig Peckham, equity trading strategist with Jefferies & Co., discussed the market’s sharp declines on Wednesday. Peckham said the latest data “prove the point that the fundamental picture is really deteriorating in real time.”

Peckham said that while it is unlikely we’ll retest the lows of last week, he noted that there “seems to be another 5 percent of downside in the short term.” The market is going to be “very, very choppy for the next six months,” Peckham added.

The major averages have seen some further downside in recent trading, pulling back to new lows for the session. The Dow is currently down 403.89 at 8,907.10, the Nasdaq is down 71.41 at 1,707.60 and the S&P 500 is down 51.82 at 946.19.

Sector News

Energy and steel stocks are turning in some of the worst performances of the day. A more than $3 a barrel drop in the price of a barrel of crude oil has taken a toll on energy stocks, while a general decline in confidence in the economic environment has made infrastructure-related materials like steel less sought after.

With the price of oil at around $76 per barrel after hitting a one-year intraday low earlier in the session, oil and oil services stocks are posting massive losses after closing nearly flat in the previous trading session.

The Amex Oil Index is suffering a loss of 9.8 percent, led by Marathon Oil (MRO), which is seeing a loss of over 14.4 percent. The oil index has offset a big chunk of the gain it posted on Monday, although it remains well off the three-year closing low it set last Friday.

After posting only a moderate loss in the previous session, the Amex Steel Index is currently leading the markets lower with a decline of 13.9 percent.

Within the steel sector, Cleveland-Cliffs Inc. (CLF), POSCO (PKX), and Mechel (MTL) are leading the plunge, with all three showing losses of 15 percent or more. Adding to the substantial decline, ten other stocks in the index are seeing losses of over 10 percent.

Housing and railroad stocks are also seeing substantial weakness on the day. Currently, the Philadelphia Housing Sector Index is down 9.3 percent, as investors continue to fear the uncertainty of the housing market.

In the railroad sector shares of CSX (CSX) are leading the decline, falling 12.7 percent after the company reported lower third quarter net earnings.

While most other major sector indices are also showing losses, airline stocks are responding positively to the declining crude oil prices. The Amex Airline Index is currently up 1.4 percent, led by significant gains by Mesa Air Group (MESA), AirTran Holdings (AAI), and AMR Corp. (AMR).

Stocks In The News

Among individual stocks, shares of Jones Apparel (JNY) are sharply lower in early afternoon trading, with the apparel designer currently down 23.3 percent. At its low for the session, Jones Apparel was at a twelve-year intraday low.

The loss by Jones Apparel comes after the company lowered its full year earnings guidance to a range of $0.93 to $0.98 per share from its previous guidance of $1.20 to $1.35 per share, citing the continued weakening of the overall economic climate.

Shares of Linear Technology (LLTC) are also under pressure after the chipmaker forecast a 10 to 20 percent sequential decline in second quarter revenues due to a recent decrease in orders and softness in the industry. Linear is currently down 16 percent after hitting a six-year intraday low.

On the other hand, shares of Altera (ALTR) are currently up 1.4 percent after the chipmaker reported third quarter earnings that rose year-over-year and came in slightly above analyst estimates. However, Altera also forecast fourth quarter sales below expectations.

Other Markets

In overseas trading, profit taking contributed to significant weakness across the markets in the Asia-Pacific region. Wall Street’s decline overnight prompted investors to sell stocks. Nonetheless, Japan’s benchmark Nikkei 225 Index bucked the downtrend, closing up 1.1 percent.

The major European markets also ended the day sharply lower, partly offsetting the gains posted in the two previous sessions. The French CAC 40 Index and the German DAX Index fell 6.8 percent and 6.5 percent, respectively, while the U.K.’s FTSE 100 Index closed down 7.2 percent.

Despite the substantial weakness in the stocks markets, treasuries also remain under pressure amid concerns that the government will need to sell more debt. Subsequently, the yield on the benchmark ten-year currently remains up 5.2 basis points at 4.075 percent.

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Posted in Categories: Economy, Eurozone, Japan, Releases, USA.

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