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Benchmarks ended in the red on Tuesday following a late selloff primarily due to mounting tension in Iraq. The blue-chip index suffered its biggest drop in over a month. The S&P 500 settled in negative territory after touching an intra-day all time high of 1968.17. The day’s initial gains, largely a result of encouraging home sales data and an improvement in consumer confidence, were eroded by the end of the trading session.

For a look at the issues currently facing the markets, make sure to read today’s Ahead of Wall Street article
 
The Dow Jones Industrial Average (DJI) declined 0.7% to close Tuesday’s trading session at 16,818.13. The Standard & Poor 500 (S&P 500) dropped 0.6% to finish at 1,949.98. The tech-laden Nasdaq Composite Index dropped 0.4% to 4,350.36. The fear-gauge CBOE Volatility Index (VIX) surged 10.5% to settle at 12.13. Total volume for the day was roughly 5.69 billion shares, higher than this month’s average of 5.61 billion. Decliners outpaced advancing stocks on the NYSE. For 61% stocks that declined, 36% advanced.
 
Benchmarks reversed course post noon to settle in the red on Tuesday. Escalating tension in Iraq was cited as the primary reason that led to the selloff. U.S. Secretary of State John Kerry met officials from Iraq’s semi-autonomous Kurdish region capital of Arbil. Kerry said: “This is a very critical time for Iraq and the government formation challenge is the central challenge that we face.” He added Kurdish forces were “really critical in helping to draw a line with respect to ISIL.”
 
The Sunni insurgents are led by the Islamic State of Iraq and the Levant (ISIL). According to the United Nations, the sectarian clashes have led to the killing of about 1075 people and wounded another 658 people between June 5 and 22.  The onslaught has alarmed world leaders and has put tremendous pressure on the Prime Minister of Iraq, Nouri al-Maaliki, to take action against the militants.
 
Meanwhile, Kerry’s talks came in at a time when Iraqi forces were able to hold off assaults on the country’s largest oil refinery at Baiji, north of Baghdad. The oil refinery provides almost 50% of domestic refined petroleum products. Repeated assaults on the complex by the militants have sent jitters across world markets. Further, Iraq’s security forces along with allied tribal fighters defended a militant attack on the strategic western town of Haditha in Anbar province.
 
The turmoil in Iraq led to a rise in U.S. Brent oil price. Brent crude oil price increased $0.34 to settle at $114.46 a barrel. U.S. crude for August delivery also rose by 0.7% to settle at $106.76 a barrel.
 
Early in the session, investors were enthused by positive economic data. The U.S. Census Bureau and the Department of Housing and Urban Development reported upbeat new single-family home sales. Sales of new single-family houses increased 18.6% from April’s revised rate of 425,000 to seasonally adjusted annual rate of 504,000 in May. This surge in new home sales in May touched the highest annual level in six years. The rise was also larger than expected as the consensus estimate predicted it would improve to 439,000.
 
S&P/Case-Shiller Home Price Indices data was somewhat mixed. The 20-City composite index rose 10.8% year on year in April. However, the rate of growth was down from March’s year-on-year rise of 12.4%. Key housing stocks such as Lennar Corp. (NYSE:LEN), PulteGroup, Inc. (NYSE:PHM), Beazer Homes USA Inc. (NYSE:BZH), KB Home (NYSE:KBH) and DR Horton Inc. (NYSE:DHI) increased 1.4%, 0.3%, 1.9%, 1.0% and 1.2%, respectively.
 
Separately, the Conference Board reported that the Consumer Confidence Index has improved from May’s 82.2 to 85.2 in June. The rise in consumer confidence was larger than consensus estimate of an increase to 83.6. The Present Situation Index increased to 85.1 in June from 80.3 in May. The Expectations Index was at 85.2 in June compared to 83.5 in May.
 
Seven out of 10 sectors of the S&P 500 ended in the red. The energy sector declined the most among the S&P industry groups. The Energy Select Sector SPDR (XLE) declined 2.1%. Key energy stocks such as Exxon Mobil Corporation (NYSE:XOM), Chevron Corporation (NYSE:CVX), Schlumberger Limited (NYSE:SLB), Halliburton Company (NYSE:HAL), Transocean Ltd. (NYSE:RIG) and ConocoPhillips (NYSE:COP) dropped 1.6%, 0.9%, 1.8%, 3.1%, 2.8% and 1.5%, respectively.
 
The Industrial Select Sector SPDR (XLI) declined 1.0%, the second highest among the S&P 500 sectors. Key stocks from the industrial sector such as General Electric Company (NYSE:GE), United Technologies Corp. (NYSE:UTX), Union Pacific Corporation (NYSE:UNP), The Boeing Company (NYSE:BA) and 3M Company (NYSE:MMM) dropped 0.4%, 1.2%, 1.0%, 1.3% and 0.7%, respectively.

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