Sellers emerge as Europe craters

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Stocks are down this morning as negative headlines overseas add fuel to yesterday's bearish close.

S&P 500 futures are falling by about one-third of a percent, while most indexes in Europe are down by 1 percent to 2 percent. Similar losses occurred in Asia, led by a 3 percent decline in Shanghai.

Chinese authorities are cracking down on real-estate speculation, while European manufacturing data showed a greater-than-expected contraction in the region's manufacturing sector. Those news reports follow minutes from the Federal Reserve yesterday when some policymakers wanted to halt the policy of aggressive asset purchases in the United States. Housing data was also weaker than expected, triggering the biggest drop since mid-November.

Sentiment had been firmly bullish since the end of 2012, when politicians in Washington struck a deal to avert sharp tax increases. Equities drifted higher for the next six weeks as companies reported quarterly results and economic data showed steady improvement.

Those gains slowed more recently as the S&P 500 paused at a long-term resistance from late 2007. Treasury yields, which tend to follow share prices, have also reached levels where traders would logically expect a pause or reversal.

Investors also now face the potential return of political risk as lawmakers in the U.S. attempt to prevent spending cuts under so-called sequestration and as voters go to the polls in Italy this weekend.

Oil and copper, which track global economic sentiment, are down by more than 1.3 percent, agricultural foodstuffs are lower across the board. Foreign-exchange markets are showing a similar pattern of risk aversion, with the euro lower and the safe-haven Japanese yen higher across the board.

In company-specific news, retail giant Wal-Mart Stores is up slightly after a lower tax rates caused earnings to beat expectations. Construction and engineering firms Fluor and Quanta Services are both lower: FLR after revenue missed consensus and PWR on a weak outlook. Enterprise software company Pegasystems is up 20 percent on a strong report.

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