Stocks Seeing Notable Losses Following Release of Economic Data - U.S. Commentary

(RTTNews) - Investors are selling stocks in morning trading on Monday following the release of two key economic reports. While the Commerce Department said that consumer income and spending was higher in June, a higher reading on inflation spooked traders.

Personal income unexpectedly showed a modest increase in the month of June, according to a report released by the Department of Commerce on Monday, with the report also showing a slightly bigger than expected increase in personal spending.

The report showed that personal income edged up 0.1 percent in June following a revised 1.8 percent increase in May. Economists had expected income to slip 0.1 percent compared to the 1.9 percent increase originally reported for the previous month.

The Commerce Department also said that personal spending increased by 0.6 percent in June after rising 0.8 percent in the previous month. The increase came in slightly above economist estimates of a 0.5 percent increase.

While personal spending rose by more than expected, spending actually decreased after adjusting for inflation. Excluding inflation, spending fell 0.2 percent in July following a 0.3 percent increase in the previous month.

The report showed that consumer prices, excluding food and energy prices, rose 0.3 percent in June after showing a 0.2 percent increase in May. On an annual basis, prices were up 2.3 percent compared to the same month last year.

Separately, the Commerce Department released a report on Monday showing a much bigger than expected increase in orders for manufactured goods in the month of June.

The report showed that factory orders increased by 1.7 percent in June following an upwardly revised increase of 0.9 percent in May. Economists had been expecting a more modest increase of about 0.7 percent compared to the 0.6 percent increase originally reported for the previous month.

In recent trading, the major averages have moved more firmly into negative territory although they have moved off of their worst levels of the day in the past few minutes. The Dow is currently down 69.78 at 11,256.54, the Nasdaq is down 19.53 at 2,291.43 and the S&P 500 is down 7.69 at 1,252.62.

Among stocks that are seeing notable movements, AT&T (T | Quote | Chart | News | PowerRating) and Yahoo (YHOO | Quote | Chart | News | PowerRating) are moving to the downside. AT&T is currently down 2.3 percent after setting a nearly two year intraday low. Yahoo is falling 2.2 percent, setting a six month intraday low.

Sector News

Steel stocks are seeing significant selling pressure, with the Amex Steel Index falling 2.9 percent. The decline in the steel sector is adding to losses seen in the previous two sessions. Within the sector, Posco (PKX | Quote | Chart | News | PowerRating) is seeing one of the worst declines, down 5.7 percent.

Oil service stocks are also seeing notable declines, as oil prices see a modest decline. The Philadelphia Oil Service Index is down 1.5 percent, reversing a modest gain posted in the previous session. With the decline, the index is just off of a three-month intraday low.

Among oil service stocks, Noble Corp. (NE | Quote | Chart | News | PowerRating) is one of the biggest losers. The stock is currently down 3.8 percent after hitting a four-month intraday low. Earlier in the day, the company announced that its board of directors declared a dividend of $0.04 per ordinary share, which will be paid on August 29th to shareholders of record on August 13th.

The financial sector is sharply lower as well, including bank and brokerage stocks. The S&P Bank Index is down 3.2 percent, while the Amex Securities Broker/Dealer Index is falling 2.7 percent.

Other stocks that are showing weakness include housing, telecommunications and biotechnology stocks. The Philadelphia Housing Index is down 1.3 percent, the Amex Telecommunications Index is down 1.5 percent and the Amex Biotechnology Index is down 1.8 percent.

On the other hand health insurance stocks are seeing notable gains, led higher by Humana (HUM | Quote | Chart | News | PowerRating) after the insurer reported second quarter earnings that beat expectations. Shares of Humana are up 4.6 percent, contributing to a 1.5 percent gain by the Morgan Stanley Healthcare Payor Index.

Stocks Driven By Analysts Comments

Among individual stocks, Wachovia (WB | Quote | Chart | News | PowerRating) is seeing significant selling pressure following comments made by a Morgan Keegan analyst. The analyst recommended selling the stock after last week's rally, stating that nothing fundamentally has changed and that the bank is still facing increasing credit losses. Morgan Keegan maintains an Underperform rating on Wachovia.

Shares of the national bank are currently trading 8.9 percent lower, ending its recent uptrend. The stock rose in the previous four sessions, setting a six-week closing high on Friday.

Deere & Co. (DE | Quote | Chart | News | PowerRating) is also under considerable selling pressure after a Goldman Sachs analyst removed the stock from its Americas Buy list. The analyst stated that other manufacturing companies are expected to post better returns. Along with the comments, the analyst cut Deere's price target to $84. The stock is down 4.1 percent.

On the other hand, Kindred Healthcare (KND | Quote | Chart | News | PowerRating) was upgraded to an Outperform rating at Wachovia a after the company reported solid second quarter results and boosted its full year forecast. Shares of Kindred Healthcare are up 9.6 percent after reaching their best intraday level in well over a year.

Other Markets

Stock markets across the Asia-Pacific region closed lower on Monday, as Wall Street's decline on Friday renewed concerns about the strength of the world's largest economy. The key Nikkei index fell below the 13,000 mark for the first time in two weeks, as a dismal earnings outlook for Japanese companies and uncertainty about the U.S. economy weighed on investor sentiment. The benchmark Nikkei 225 index closed down 1.2 percent.

The major European markets are trading on a mixed note on Monday. The French CAC 40 Index is receding 0.4 percent, while the German DAX Index is sliding 0.7 percent. Meanwhile, the U.K.'s FTSE 100 Index is gaining 0.2 percent.

In corporate news, HSBC Holdings (HSBC | Quote | Chart | News | PowerRating) reported a 28 percent decline in its first-half profits to $10.2 billion, mainly dragged lower by a loss of $2.8 billion in its North American segment.

In the bond markets, treasuries have moved into positive territory after seeing earlier weakness. Subsequently, the yield on the benchmark ten-year note is currently down 1 basis point at 3.938 percent.

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