(RTTNews) - After a choppy trading day, stocks ended Tuesday’s session with moderate losses, as investors digested a report showing a much larger than expected drop in consumer sentiment. Nonetheless, some buying interest within the financial sector kept the losses in the broader markets muted.

Stocks saw considerable weakness in early trading, with a report from the Conference Board showing a considerable deterioration in consumer confidence in the month of June contributing to the early weakness.

The Conference Board said its consumer confidence index fell to 50.4 in June from a revised 58.1 in May. Economists had been expecting a more modest decline to a reading of about 56.0 compared to the 57.2 originally reported for the previous month.

Additionally, pointing to soaring fuel costs and slowing U.S. economic growth, United Parcel Service (UPS) cut its earnings outlook for the second quarter. The world’s largest shipping carrier said it now expects second quarter earnings to be in the range of $0.83 to $0.88 per share, compared to its prior guidance of $0.97 to $1.04 per share.

The strength in the financial sector came after Wachovia (WB) said it has hired Goldman Sachs Group for advice on the company’s loan portfolio and to evaluate various alternatives. Last week, rumors circulated that the bank hired Goldman to aid it in searching for a new Chief Executive.

While the major averages ended the session well off of their intraday lows, the Dow and the S&P 500 set new three-month closing lows and the Nasdaq closed at its worst level in two months. The Dow closed down 34.93 points or 0.3 percent at 11,807.43, the Nasdaq closed down 17.46 points or 0.7 percent at 2,368.28 and the S&P 500 closed down 3.71 points or 0.3 percent at 1,314.29.

Sector News

Chemical stocks turned in some of the worst performances, with the S&P Chemical Index falling 3.4 percent. The index reversed a modest gain posted in the previous session to set a four-week closing low. The weakness in the sector came after Dow Chemical (DOW) announced plans to raise prices by 25 percent due to higher energy and raw materials costs.

Within the chemical sector, Hercules (HPC) was one of the biggest losers. Earlier in the day, the chemical maker announced that it has acquired Brazilian chemical company Logos Quimica for an undisclosed sum. Shares of Hercules closed down 3.6 percent, setting a three-month closing low.

Some resource stocks were notably lower as well, despite modest gains in commodities. Within the resource sector, natural gas and oil service stocks were the biggest losers. The Amex Natural Gas Index closed down 2.6 percent, while the Philadelphia Oil Service Index dropped 2.2 percent.,

United Parcel Service led transportation stocks lower after the company cut its earnings outlook for the second quarter. Shares of the shipping carrier closed down 6 percent, contributing to a 1.9 percent decline by the Dow Jones Transportation Average.

Other stocks that closed notably lower include networking, wireless and disk drive stocks. The Amex Networking Index closed down 1.5 percent, the Amex Wireless Index closed down 1 percent and the Amex Disk Drive Index closed down 1.3 percent.

On the other hand, bank stocks saw considerable strength, boosted by investors looking to buy up the stocks at bargain prices. The S&P Bank Index closed up 3.2 percent, moving off of an eleven-year closing low.

Separately, Centurytel (CTL) led the telecommunications sector higher after the company raised its dividend tenfold and accelerated its repurchase plan. Centurytel closed up 17.7 percent, contributing to a 1.9 percent gain by the Amex North American Telecommunications Index. Brokerage, housing and drug stocks posted notable gains as well.

Dow Components

After seeing modest gains in mid-day trading, the Dow components moved to the downside, sending the blue chip index modestly lower. Of the 30 stocks that make up the Dow, 16 ended the day weak, 13 closed with modest gains and IBM (IBM) ended the day unchanged.

Caterpillar (CAT) led the Dow lower after the company announced that it would buy Brazilian company MGE Equipamentos & Servicos Ferroviarios Ltda. for an undisclosed amount. Shares of the heavy machinery manufacturer closed down 4.2 percent, setting a two-month closing low.

DuPont (DD) also saw significant selling pressure, adding to the substantial losses posted in the previous two sessions. Shares of the chemical maker closed down 3.3 percent, setting a five-month closing low. The stock has been trending lower for the past two months.

Earlier in the day, DuPont announced that it signed a crop protection technology agreement with Swiss agrochemical company Syngenta. Under the deal’s terms, the companies will share costs to prepare regulatory studies for a new insecticide aimed at controlling insects such as moths.

Alcoa (AA) ended the session with a sharp loss as well. The stock has been trending lower for the past two weeks, closing at a seven-week closing low. Shares of Alcoa closed fell 2.2 percent.

Other Dow components that closed with moderate losses include Verizon (VZ), AIG (AIG) and Hewlett Packard (HPQ). Verizon closed down 1.4 percent, AIG closed down 1.6 percent and Hewlett Packard closed down 1 percent.

On the other hand, Merck (MRK) ended the session with a substantial gain. The stock closed up 3.4 percent, adding to a gain posted in the previous session to set a two-week closing high.

Financial stocks, American Express (AXP), Bank of America (BAC) and JP Morgan Chase (JPM) saw significant buying interest as well. American Express closed up 3 percent, compared to a 2.9 percent gain by Bank of America. JP Morgan Chase ended the session 2.3 percent higher.

Pfizer (PFE) also showed considerable strength. The stock closed up 1.8 percent. General Motors (GM), Citigroup (C) and Wal-Mart Stores (WMT) closed higher as well. General Motors closed up 2.2 percent, Citigroup closed up 1.6 percent and Wal-Mart closed up 1.2 percent.

Other Markets

In overseas trading, the stock markets across the Asia-Pacific region closed mixed on Tuesday ahead of the U.S. Federal Reserve’s two-day meeting. Japan’s Nikkei 225 index fell 0.1 percent to finish at 13,849.56.

Meanwhile, the major European markets ended their sessions lower. The French CAC 40 Index and the German DAX Index closed down 0.8 percent and 0.8 percent, respectively, while the U.K.’s FTSE 100 Index ended the day 0.6 percent lower.

Treasuries ended Tuesday’s session with gains. The benchmark ten-year note moved higher at the start trading, but it pared its gain in the late morning. Nonetheless the note moved back to the upside in the afternoon, closing just off of its intraday high. Subsequently, the yield on the ten-year note closed down 6.3 basis points at 4.105 percent.

Looking Ahead

Looking ahead to Wednesday, all eyes will be on the Federal Reserve when it concludes its scheduled meeting. With a weak economy and elevated inflation, the Federal Reserve will have to tread lightly regarding interest rates. Economists expect the Fed to keep rates unchanged.

While most investors will be waiting for the Fed’s decision on interest rates, the Department of Commerce will also be releasing its durable goods data. Analysts expect durable goods to remain unchanged for the month of May.

In earnings news, Jabil Circuit (JBL), Darden Restaurants (DRI) and 3Com (COMS) will release their quarterly results after the closing bell on Tuesday. Before the markets open on Wednesday, General Mills (GIS) and Monsanto (MON) will release their results as well.

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