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Stocks Continue To Turn In A Lackluster Performance - U.S. Commentary


Stocks have shown a lack of direction over the course of the trading day on Monday, as traders seem reluctant to make any significant moves following recent strength. A mixed batch of economic data is also contributing to the choppy trading.

The major averages are currently turning in a mixed performance, with the Nasdaq in positive territory. While the Nasdaq is up 10.73 points or 0.3 percent at 3,160.44, the Dow is down 3.03 points or less than a tenth of a percent at 13,892.95 and the S&P 500 is down 0.89 points or 0.1 percent at 1,502.07.

The lackluster performance on Wall Street comes as traders express uncertainty about the near-term outlook for the markets after recent gains lifted the Dow and the S&P 500 to five-year highs.

Traders also seem to be staying on the sidelines ahead of the Federal Reserve meeting and the release of the monthly jobs report later in the week.

While some buying interest was generated by a Commerce Department report showing a much bigger than expected increase in durable goods orders, the positive sentiment was largely offset by a separate report from the National Association of Realtors showing a sharp drop in pending home sales.

The Commerce Department said durable goods orders surged up by 4.6 percent in December following a 0.7 percent increase in November. Economists had been expecting orders to increase by about 1.6 percent.

Excluding an 11.9 percent jump in orders for transportation equipment, durable goods orders increased by a more modest 1.3 percent, although the increase still far exceeded economist estimates.

Meanwhile, NAR said its pending home sales index fell 4.3 percent to 101.7 in December after climbing 1.6 percent to a two-year high of 106.3 in November. Economists had expected the index to edge down by a much more modest 0.3 percent.

A pending home sale is one in which a contract was signed but not yet closed. Normally, it takes four to six weeks to close a contracted sale.

Traders are also digesting the latest batch of earnings news, with shares of Caterpillar (CAT) moving notably higher even though the construction equipment maker reported fourth quarter earnings that fell sharply year-over-year. Caterpillar is currently up by 2.2 percent.

Sector News

While most of the major sectors are showing only modest moves, housing stocks are seeing considerable weakness following the disappointing pending home sales data. The Philadelphia Housing Sector Index is down by 1.3 percent after ending last Friday's trading at a five-year closing high.

Hovnanian Enterprises (HOV) and M/I Homes (MHO) are turning in two of the housing sector's worst performances, falling by 2.9 percent and 1.8 percent, respectively.

Chemical stocks have also come under pressure, dragging the Dow Jones Chemicals Index down by 1 percent. PPG Industries (PPG) has helped to lead the chemical sector, sliding 3.9 percent.

Steel stocks are also seeing notable weakness on the day, while electronic storage stocks have shown a strong move to the upside. The NYSE Arca Disk Drive Index has risen by 1.7 percent, reaching its best intraday level in almost four months.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region turned in another mixed performance on Monday. While Japan's Nikkei 225 Index fell by 0.9 percent, Hong Kong's Hang Seng Index ended the day up by 0.4 percent.

The major European markets also ended the day on opposite sides of the unchanged line. The German DAX Index dropped by 0.3 percent, while the U.K.'s FTSE 100 Index and the French CAC 40 Index edged up by 0.2 percent and 0.1 percent, respectively.

In the bond market, treasuries have come under pressure on the heels of the durable goods orders data. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, is up by 4.5 basis points at 1.992 percent.

by RTTNews Staff Writer

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