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Stocks Close Modestly Higher But Well Off Best Levels - U.S. Commentary


After failing to sustain an early move to the upside, stocks gave back ground over the course of the trading session on Monday. The major averages pulled back well off their best levels of the day but managed to close in positive territory.

The major averages ended the day modestly higher. The Dow rose 68.24 points or 0.3 percent to 24,889.41, the Nasdaq inched up 8.43 points or 0.1 percent at 7,411.32 and the S&P 500 crept up 2.41 points or 0.1 percent to 2,730.13.

The early strength on Wall Street came amid easing trade tensions ahead of a second round of trade talks between the U.S. and China this week.

Ahead of the meeting, President Donald Trump indicated in a post on Twitter that he is working with Chinese President Xi Jinping to get Chinese telecom giant ZTE Corp. "back into business, fast."

"President Xi of China, and I, are working together to give massive Chinese phone company, ZTE, a way to get back into business, fast," Trump tweeted. "Too many jobs in China lost. Commerce Department has been instructed to get it done!"

ZTE has been crippled by a ban on U.S. supplies to its business, and sources briefed on the matter told Reuters that China has demanded the issue be resolved as a prerequisite for broader trade negotiations.

In a subsequent tweet, Trump expressed optimism about trade talks with China despite claiming past negotiations have been one-sided in favor of Beijing.

"China and the United States are working well together on trade, but past negotiations have been so one sided in favor of China, for so many years, that it is hard for them to make a deal that benefits both countries," Trump tweeted. "But be cool, it will all work out!"

Buying interest waned over the course of the session, however, with some traders reluctant to continue buying stocks amid a lack of major U.S. economic data.

Reports on retail sales, homebuilder confidence, housing starts, and industrial production are likely to attract attention in the coming days.

Sector News

Natural gas stocks saw considerable strength on the day, with the NYSE Arca Natural Gas Index climbing by 1.7 percent. With the gain, the index reached its best closing level in over three months.

The advance by natural gas stocks came amid an increase by the price of the commodity, as natural gas rose $0.036 to $2.842 per million BTUs.

Significant strength was also visible among semiconductor stocks, as reflected by the 1.3 percent gain posted by the Philadelphia Semiconductor Index.

NXP Semiconductors (NXPI) posted a standout gain after a report from Bloomberg said Chinese regulators have restarted their review of Qualcomm's (QCOM) application to acquire the chipmaker.

Biotechnology, telecom, and oil stocks also saw notable strength on the day, while real estate stocks moved to the downside.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved mostly higher during trading on Monday. Japan's Nikkei 225 Index climbed by 0.5 percent, while Hong Kong's Hang Seng Index shot up by 1.4 percent.

Meanwhile, the major European markets saw modest weakness on the day. While the French CAC 40 Index closed just below the unchanged line, the U.K.'s FTSE 100 Index and the German DAX Index both edged down by 0.2 percent.

In the bond market, treasuries moved to the downside after ending last Friday's trading nearly flat. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, rose by 2.4 basis points to 2.995 percent.

Looking Ahead

Following a quiet day on the U.S. economic front, trading on Tuesday may be impacted by reaction to reports on retail sales, homebuilder confidence, and New York manufacturing activity.

Traders are also likely to keep an eye on earnings news from Home Depot (HD), with the home improvement retailer due to release its first quarter results before the start of trading.

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