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Stock Market Update for 03/16/2011

March 16, 2011

While selling pressure has remained relatively subdued, stocks are seeing modest weakness in mid-morning trading on Wednesday. A disappointing report on housing starts is contributing to the weakness in the markets along with continued concerns about the nuclear crisis in Japan.stock trading

The major averages are currently posting moderate losses, off their lows for the session. The Dow is down 66.68 points or 0.6 percent at 11,788.74, the Nasdaq is down 5.35 points or 0.2 percent at 2,661.98 and the S&P 500 is down 4.65 points or 0.4 percent at 1,277.22.

The weakness in the markets comes following the release of a report from the Commerce Department showing that housing starts fell by much more than expected in the month of February.

The report showed that housing starts fell 22.5 percent to an annual rate of 479,000 in February from the revised January estimate of 618,000. Economists had expected starts to fall to 560,000 from the 596,000 originally reported for the previous month.

The latest figures put the rate of new housing starts just above a low point of 477,000 set in April 2009 and show a drop of 20.8 percent from the February 2010 rate of 605,000.

Meanwhile, the Labor Department released a separate report showing that producer prices increased by much more than expected in February amid sharply higher food and energy prices.

The Labor Department said its producer price index jumped by 1.6 percent in February following a 0.8 percent increase in January. Economists had been expecting producer prices to increase by a much more modest 0.7 percent.

Excluding the jumps in food and energy prices, the core producer index edged up by 0.2 percent in February after rising by 0.5 percent in the previous month. The modest increase in core prices came in line with economist estimates.

Traders are also keeping a close eye on the situation in Japan, where workers at the Fukushima nuclear facility have resumed efforts to prevent a meltdown at the earthquake-crippled plant after being forced to temporarily call off operations following a spike in radiation levels.

Sector News

Housing stocks are seeing notable weakness in morning trading following the release of the disappointing report on housing starts. Hovnanian Enterprises (HOV) and KB Home (KBH) are turning in two of the sector’s worst performances, falling by 4 percent and 2.4 percent, respectively.

Weakness is also visible among software stocks, with industry giant Microsoft (MSFT) helping to lead the way lower with a 1 percent loss. Adobe Systems (ADBE) and SAP (SAP) are also posting notable losses.

Tobacco, pharmaceutical, and defense stocks are also seeing modest weakness, although selling pressure remains relatively subdued.

Meanwhile, networking stocks are posting strong gains, resulting in a 1.1 percent advance by the NYSE Arca Networking Index. Gains by natural gas and semiconductor stocks are also helping to limit the downside for the broader markets.

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