Stocks Close Mixed After Choppy Trading Session - U.S. Commentary

Tue. June 23, 2009; Posted: 04:45 PM

(RTTNews) - Stocks finished Tuesday little changed, marred by another low volume session characteristic of the summer trading season. The major averages finished on opposite sides of the unchanged mark by only mild margins, unable to sustain any notable moves on the day.

The lackluster performance came as some traders stayed on the sidelines ahead of the announcement of the Federal Reserve's announcement of its latest decision on interest rates. While the Fed is expected to leave rates unchanged, traders will keep a close eye on the accompanying statement.

Early gains were erased by trader reaction to a report from the National Association of Realtors, which showed that existing homes sales rose for the second consecutive month in May but still came in below economist estimates.

The report showed that existing home sales rose 2.4 percent to an annual rate of 4.77 million units in May from a revised 4.66 million units in April. Economists had expected sales to rise 3 percent to 4.82 million units from the 4.68 million units originally reported for the previous month.

Despite the downward revision to April sales, the annual rate of existing home sales for the month was still up 2.4 percent compared to March. Subsequently, existing home sales showed their first back-to-back monthly gains since September 2005.

On the corporate front, shares of Rambus (RMBS | Quote | Chart | News | PowerRating) closed significantly lower after the memory chip maker lowered its second quarter revenue guidance, citing the impact of the spiraling economy and its effect on the sales of semiconductors and consumer electronic systems.

In other news, Anglo American rejected Swiss mining company Xstrata's proposal for a $68 billion merger of equals on the grounds that the merger was unattractive to its shareholders.

The major indices saw choppy trading throughout the day, bouncing in and out of positive territory for most of the session. While the S&P 500 finished up by 2.06 points or 0.2 percent at 895.10, the Dow slipped by 16.10 points or 0.2 percent to 8,322.91, and the Nasdaq dropped by 1.27 points or 0.1 percent to 1,764.92.

Sector News

Despite the lack of direction shown by the broader markets, retail stocks saw notable weakness, with the S&P retail index dropping by 1.8 percent on the day. The decline pulled the index down to its lowest closing level in well over two months.

Additional weakness was visible among airline and healthcare provider stocks, with the NYSE Arca Airline Index and the Morgan Stanley Healthcare Provider Index both falling by 1.5 percent. While the airline index fell to its lowest closing level in nearly three months, the healthcare provider index set a one-month closing low.

On the other hand, resource stocks moved higher on the day, offsetting some of yesterday's steep losses. Gold and steel stocks showed considerable upward moves, as reflected by the 4.2 percent climb by the NYSE Arca Gold Bugs Index and the 3.4 percent jump by the NYSE Arca Steel Index.

Banking, oil service, chemical, and telecommunication stocks also rose on the day, regaining some of the ground lost during yesterday's broad based sell-off.

Dow Components

The Dow components finished the day roughly split, contributing to the uninspiring performance turned in by the blue chip index.

One of the day's most notable pullbacks came as shares of Boeing (BA | Quote | Chart | News | PowerRating) dropped by 6.5 percent on the day. The stock closed at its worst level in nearly a month after the firm announced that the first test flight of the 787 Dreamliner would be postponed yet again due to structural problems.

On the other hand, the day's loss was mitigated by shares of Verizon (VZ | Quote | Chart | News | PowerRating), which rose by 1.7 percent. The day's gain lifted the stock to its best closing level in seven weeks.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region ended Tuesday's session showing steep losses. Japan's benchmark Nikkei 225 Index closed down 2.8 percent, while Hong Kong's Hang Seng Index fell 2.9 percent.

Meanwhile, the major European markets finished the day on opposite sides of the unchanged line. The French CAC 40 Index and the U.K.'s FTSE 100 Index slipped by 0.2 percent and 0.1 percent, respectively, while the German DAX eked out a 0.3 percent gain.

In the bond markets, treasuries closed notably higher amid some near-term economic concerns. Subsequently, the yield on the benchmark ten-year note finished at 3.640 percent, a drop of 5.3 basis points on the day.

Looking Ahead

Wednesday, traders will likely look to separate reports from the Department of Commerce on durable goods orders and new home sales figures for the month of May. Durable goods are expected to fall by 0.9 percent, while sales of new homes are expected to show a modest increase.

Nonetheless, the results of the Federal Open Market Committee's latest meeting are likely to garner the most attention. Traders will look to the Fed's decision on near-term monetary policy amid some market concern over inflation and any comments regarding the current economic climate.

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