Dow Posting Notable Loss Amid News Of Changes In Components

Stocks continue to turn in a lackluster performance in mid-day trading on Tuesday, although the Dow has shown a notable move to the downside after reaching a new six-month intraday high in early trading. The broader Nasdaq and S&P 500 are showing more modest moves.

Currently, the Dow is off its worst levels of the day but still down 176.30 points or 0.6 percent at 28,132.16. Meanwhile, the S&P 500 is down 2.42 points or 0.1 percent at 3,428.86 but the Nasdaq is up 18.83 points or 0.2 percent at 11,398.55.

The drop by the Dow comes as Exxon Mobil (XOM), Raytheon (RTX) and Pfizer (PFE) are moving notably lower following news they are being removed from the blue chip index.

The three stocks will be replaced by Salesforce.com (CRM), Honeywell (HON), and Amgen (AMGN), which are posting strong gains on the day.

The changes to the Dow components come as Apple’s (APPL) upcoming 4-for-1 stock split will reduce the index’s weight in the information technology sector.

The lack of direction being shown by the Nasdaq and S&P 500 comes as traders some uncertainty about the near-term outlook following the indexes recent run to record highs.

Traders may also be looking ahead to Federal Reserve Chair Jerome Powell’s highly anticipated speech at the Jackson Hole symposium on Thursday.

A mixed batch of U.S. economic data may also be contributing to the choppy trading, with separate reports showing a much bigger than expected spike in new home sales and an unexpected deterioration in consumer confidence.

The Commerce Department released a report showing new home sales spiked by 13.9 percent to an annual rate of 901,000 in July after soaring by 15.1 percent to a rate of 791,000 in June.

Economists had expected new home sales to climb by 1.2 percent to a rate of 785,000 from the 776,000 originally reported for the previous month.

The much bigger than expected jump lifted new home sales to their highest annual rate since reaching 998,000 in December of 2006.

Meanwhile, a separate report from the Conference Board showed its consumer confidence index slumped to 84.8 in August after tumbling to a downwardly revised 91.7 in July.

The continued decrease came as a surprise to economists, who had expected the index to inch up to 93.0 from the 92.6 originally reported for the previous month.

Sector News

Reflecting the lackluster performance by the broader markets, most of the major sectors continue to show only modest moves in mid-day trading.

Gold stocks have shown a substantial move to the downside, however, with the NYSE Arca Gold Bugs Index tumbling by 2.2 percent.

The weakness among gold stocks comes amid a notably decrease by the price of the precious metal, as gold for December delivery is slumping $17.90 to $1,921.30 an ounce.

Considerable weakness has also emerged among airline stocks, as reflected by the 2.1 percent nosedive by the NYSE Arca Airline Index. The index is pulling back after soaring by 7.3 percent on Monday.

Energy, housing, and steel stocks have also come under significant selling pressure over the course of the trading session.

Other Markets

In overseas trading, stocks markets across the Asia-Pacific region moved mostly higher on Tuesday, although China’s Shanghai Composite Index bucked the uptrend and fell by 0.4 percent. Japan’s Nikkei 225 Index surged up by 1.4 percent, while South Korea’s Kospi spiked by 1.6 percent.

Meanwhile, the U.K.’s FTSE 100 Index tumbled by 1.1 percent on the day, while the German DAX Index and the French CAC 40 Index ended the session nearly unchanged.

In the bond market, treasuries have climbed off their worst levels but continue to see notable weakness. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, is up by 5.1 basis points at 0.697 percent.

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