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In an interview with RTT News, Ken Tower, senior vice president Institutional Research at Quantitative Analysis Service said Wall Street's recovery got ahead of an economic recovery.
"Investor enthusiasm ran a little too hot," Tower said, "People's expectations have improved but gotten a little ahead of themselves."
Tower also remarked that the rally "is probably going to take a breather for a couple of months" as earnings and guidance will "likely disappoint." However, on a more positive note, he said he doesn't "think we get anywhere near the lows," calling the sell-off a "normal…bull market correction."
The Institute for Supply Management released a report earlier in the day showing that activity in the service sector contracted for the ninth consecutive month in June, although the pace of contraction slowed by even more than economists had been expecting.
In other news, President Barack Obama is attending his first Moscow summit today, meeting with Russian President Dmitry Medvedev to discuss the relationship between the two countries. The leaders reaffirmed their commitment to the "common fight" against terrorism and drug trafficking in Afghanistan, while reaching an agreement to reduce nuclear weapon stockpiles.
The major averages have moved roughly sideways in recent trading, stuck firmly in negative territory. The Dow is currently down 27.06 at 8,253.68, the Nasdaq is down 23.77 at 1,772.75 and the S&P 500 is down 5.67 at 890.75.
Sector News
Notable weakness has continued among resource stocks, with steel and gold stocks falling by considerable margins. The NYSE Arca Steel Index and the NYSE Arca Gold Bugs have fallen by 5.3 percent and 5.1 percent, respectively.
Natural gas stocks are also pulling back sharply, as reflected by the 2.9 percent decline by the NYSE Arca Natural Gas Index. With the loss, the index has fallen to its worst intraday level in just over two months.
The NYSE Arca Oil Index is seeing comparable weakness, dipping by 2.9 percent on the day. The index has also fallen to its worst intraday level in over two months.
The move comes as commodity prices have taken a hit, with the price of oil plunging by $2.41 to $64.32 a barrel.
Semiconductor, networking, housing and healthcare provider stocks are also seeing considerable downside, reflecting the broad based pullback on the day.
Despite the retreat by most sectors, tobacco and commercial real estate stocks are seeing modest gains. The NYSE Arca Tobacco Index has risen 2.1 percent and the Morgan Stanley Real Estate Index has risen by 0.8 percent.
Stocks In The News
Regis (RGS | Quote | Chart | News | PowerRating) is sliding in early afternoon trading after the company said its fourth-quarter revenues decreased 2.5 percent to $625 million from $641 million in the year-ago period. Total same-store sales for the quarter were down 4.0 percent. Wall Street analysts estimated revenues of $617.95 million for the quarter.
The stock is down by 21.9 percent as traders reacted to the news, pushing shares down to their lowest intraday price in well over three months.
LDK Solar (LDK | Quote | Chart | News | PowerRating) is also falling after the company forecast second quarter sales between $215 million to $225 million, below analyst estimates of $247.2 million. Shares of the solar giant are down by 10.5 percent but remain stuck in a three week trading range.
Meanwhile, Bemis (BMS | Quote | Chart | News | PowerRating) is on the rise after announcing that it has signed a definitive agreement to acquire the Food Americas operations of Alcan Packaging, a business unit of international mining group Rio Tinto plc (RTP | Quote | Chart | News | PowerRating), for $1.2 billion. The stock is up by 4.1 percent, largely offsetting recent losses.
In Focus: Service Sector Data, Corporate News, Fed Buyback
As mentioned earlier, the ISM said its index of activity in the service sector rose to 47.0 in June from 44.0 in May, although a reading below 50 indicates a contraction. Economists had been expecting the index to come in at 46.0.
On the corporate front, beleaguered automaker General Motors has been granted permission by a U.S. bankruptcy judge to sell most of its assets to a U.S Treasury-funded buyer.
Food and beverage giant PepsiCo Inc. (PEP | Quote | Chart | News | PowerRating), together with its bottling partner Pepsi Bottling Group Inc. (PBG | Quote | Chart | News | PowerRating), announced its plans to invest $1 billion in Russia over three years.
EMC (EMC | Quote | Chart | News | PowerRating) raised its all-cash offer to acquire Data Domain (DDUP | Quote | Chart | News | PowerRating) to $33.50 per share for a total enterprise value of about $2.1 billion. EMC is competing with NetApp (NTAP | Quote | Chart | News | PowerRating) to acquire Data Domain.
In other news, the Federal Reserve continued its treasury buyback program Monday, completing its first quantitative easing move of the week. The New York Federal Reserve purchased $7.0 billion worth of securities with maturity dates ranging from December of 2013 to April of 2016.
The day's buyback saw a total of $18.2 billion in treasuries submitted for purchase. Overall, the Fed has purchased a total of $197.72 billion since the program began on March 25th.
Other Markets
In overseas trading, stock markets across the Asia-Pacific region ended Monday's session mostly lower. Japan's benchmark Nikkei 225 Index closed down by 1.4 percent, while Hong Kong's Hang Seng Index slipped by 1.2 percent.
The major European markets also saw notable weakness on the day, with the German DAX Index and French CAC 40 Index both finishing down 1.2 percent. The U.K.'s FTSE 100 Index also fell, posting a loss of 1 percent for the day.
In the bond markets, treasuries holding steadily in negative territory. Subsequently, the yield on the benchmark ten-year note is trading at 3.533 percent, a climb of 3.8 basis points on the day.
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