Sector Snap: Timber, Wood, Paper Stocks Downgraded

"Given the sector's stretched valuations and a need for more permanent capacity withdrawal, we recommend investors take profits and move to a selective stance within the group," she said, adding that any recovery will be modest at best.

In midday trading, Domtar fell $1.71, or 9.1 percent, to $17.04, Packaging Corp. of America declined 60 cents, or 4 percent, to $14.41 and Plum Creek lost $1.48, or 4.8 percent, to $29.29.

Meanwhile, the S&P paper and forest products index retreated 4.8 percent.