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Stocks Nearly Flat Amid Uncertainty About Outlook - U.S. Commentary


Stocks continue to show a lack of direction in mid-day trading on Friday after turning in a lackluster performance throughout the morning. Traders seem reluctant to make any significant moves amid uncertainty about the outlook for corporate earnings.

The major averages have once again turned mixed in recent trading, with the Dow creeping above the unchanged line. While the Dow is up 12.08 points or 0.1 percent at 13,483.30, the Nasdaq is down 1.37 points or less than a tenth of a percent at 3,120.39 and the S&P 500 is down 1.29 points or 0.1 percent at 1,470.83.

The lackluster performance on Wall Street comes as traders express some uncertainty about the outlook for the markets after recent gains lifted the S&P 500 to a five-year closing high.

Since earnings season is only just starting to pick up steam, traders seem to be taking a wait-and-see approach as more big-name companies release their quarterly results in the coming weeks.

Mixed news from overseas is also contributing to the choppy trading after upbeat news from overseas helped to push stocks higher in the previous session.

While news of a new $116 billion stimulus package in Japan generated some positive sentiment, a report from China showing an acceleration in the pace of inflation suggested that the Chinese may not provide further stimulus.

Meanwhile, traders have largely shrugged off a report from the Commerce Department showing that the U.S. trade deficit unexpectedly widened in the month of November.

With a jump in imports more than offsetting an increase in exports, the trade deficit widened to $48.7 billion in November from a revised $42.1 billion in October. Economists had expected the deficit to narrow to $41.1 billion.

Sal Guatieri, Senior Economist at BMO Capital markets, said, "A wider U.S. trade gap will weigh on Q4 growth, but a rebound in imports suggests domestic demand has turned up."

Among individual stocks, shares of Wells Fargo (WFC) have moved to the downside even though financial services giant reported fourth quarter earnings and revenues that exceeded analyst estimates.

Wells Fargo, the nation's largest mortgage lender, reported fourth quarter earnings of $0.91 per share on revenues of $21.9 billion. Analysts had expected the company to earn $0.89 per share on revenues of $21.3 billion.

On the other hand, shares of Infosys (INFY) have surged up by 17.3 percent after the software services provider reported better than expected third quarter results and raised its full-year revenue guidance.

Sector News

Despite the lack of direction being shown by the broader markets, steel stocks are seeing considerable weakness on the news out of China. The NYSE Arca Steel Index is down by 1.5 percent, pulling back further off the eight-month closing high it set last Wednesday.

Cliffs Natural Resources (CLF) and U.S. Steel (X) are turning in two of the steel sector's worst performances, falling by 4.3 percent and 3.2 percent, respectively.

Banking stocks are also seeing some weakness in mid-day trading, with the KBW Bank Index down by 1 percent. Regions Financial (RF) and Fifth Third Bancorp (FITB) are posting notable losses.

While health insurance stocks have also moved to the downside, airline stocks have shown a strong upward move on the day. The NYSE Arca Airline Index has advanced by 1.3 percent and is on pace to end the session at a nearly two-year closing high.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region turned in a mixed performance during trading on Friday. Japan's Nikkei 225 Index surged up by 1.4 percent, while China's Shanghai Composite Index tumbled by 1.8 percent.

Meanwhile, the major European markets moved modestly higher over the course of the session. While the U.K.'s FTSE 100 Index rose by 0.3 percent, the French CAC 40 Index and the German DAX Index both edged up by 0.1 percent.

In the bond market, treasuries are seeing modest weakness but have climbed off their worst levels of the day. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, is up by 1.3 basis points at 1.907 percent.

by RTTNews Staff Writer

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