Midday Update: Stocks Lose Early Gains On Warning About Momentum, Biotech Valuations

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Stocks gave back modest opening gains tied to strength in a regional Fed index and upbeat earnings from Goldman Sachs ( GS ) and JP Morgan ( JPM ) and slipped into the red after Federal Reserve Chair Janet Yellen suggested social media, biotech and other momentum stocks could be overvalued during Senate testimony Tuesday morning.

Yellen's semi-annual testimony to the Senate Banking Committee started off with prepared remarks concerning Fed monetary policy and economic outlooks, most of which mirrored earlier comments and did little to alter market sentiment. But when Wall Street digested the details of the the Fed's semiannual report - especially its warning of "stretched" valuation metrics for stocks like Facebook ( FB ), Twitter ( TWTR ) and the white-hot biotech sector - declines for those sectors quickly spilled into the broader markets, erasing early gains.

Economic data today was generally positive, with the Empire State manufacturing index climbing to a four-year high and a 25.6 reading lifting the Dow Jones Industrials Average to another intra-day high. Market experts had been expecting the index to fall to a 17.80 reading in July from 19.28 the prior month.

The headline event was June retail sales, but the reported 0.2% rise trailed estimates looking for a 0.6% gain. Excluding sales of automobiles and gasoline, retail sales climbed 0.4% - lagging the 0.5% consensus.

Import prices rose 0.1% last month, missing estimates for a 0.4% gain, while export prices dropped 0.4% versus the consensus for a 0.2% gain.

Finally, business inventories were up 0.5%, following a 0.6% gain in April.

European markets were unable to shake off weak EU economic data and UK inflation indicators and closed as much as 1% lower. The German and EU ZEW index pointed to further contraction in the EU-zone economy and reflected European Central Bank President Mario Draghi's dovish stance on further monetary stimulus. In addition, a rise in UK inflation raised odds for the Bank of England to raise interest rates to choke off inflationary pressure.

Crude oil was down $1.83 to $99.11 per barrel. Natural gas was down $0.03 to $4.10 per 1 million BTU. Gold was down $8.90 to $1,29710 an ounce, while silver was down $0.09 to $20.83 an ounce. Copper was unchanged at $3.25 per pound.

Among energy ETFs, the United States Oil Fund was down 1.72% to $36.66 with the United States Natural Gas Fund was down 0.98% to $22.67. Amongst precious-metal funds, the Market Vectors Gold Miners ETF was down 1.51% to 26.27 while SPDR Gold Shares was down 0.71% to $124.83. The iShares Silver Trust was down 0.80% to $19.94.

Here's where the U.S. market stand at mid-day:

NYSE Composite Index down 37.68 (-0.34%) to 10,953.79

Dow Jones Industrial Average down 38.35 (-0.22%) to 17,017.07

S&P 500 down 9.78 (-0.49%) to 1,967.32

Nasdaq Composite Index down 41.75 (-0.94%) to 4,398.67

GLOBAL SENTIMENT

Nikkei 225 Index up 0.64%

Hang Seng Index up 0.49%

Shanghai China Composite Index up 0.18%

FTSE 100 Index down 0.53%

CAC 40 down 1.03%

DAX down 0.65%

NYSE SECTOR INDICES

NYSE Energy Sector Index down 1.43%

NYSE Financial Sector Index up 0.19%

NYSE Healthcare Sector Index down 0.56%

UPSIDE MOVERS

(+) MEA (+20.66%) Sees Q2 revenue growth of 9% over last year but below expectations.

(+) CDXS (+43.97%) Signed a platform technology license agreement with GlaxoSmithKline ( GSK ) under which it will receive $25 million over the next two years.

(+) MTL (+7.87%) Reached a deal with VTB Bank to extend the maturity of loans totalling 15.8 billion rubles ($0.5 billion).

(+) ROC (+9.91%) Albemarle ( ALB ) to acquire Rockwood for $6.2 billion.

DOWNSIDE MOVERS

(-) KORS (-5.79%) Price targets lowered by Barclays, Citigroup, Sterne Agee.

(-) LO (-8.09%) To be acquired by Reynolds American (RAI) for $27.4 billion.



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.

Copyright (C) 2014 MTNewswires.com. All rights reserved. Unauthorized reproduction is strictly prohibited.


This article appears in: Investing , Commodities

Referenced Stocks: GS , JPM , FB , GSK , ALB

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