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Major Averages Close Mixed Following Lackluster Session - U.S. Commentary

wallstreet 111814 16jul18

Following the strong upward move seen last week, stocks turned in a lackluster performance during trading on Monday. The major averages showed a lack of direction, spending the day bouncing back and forth across the unchanged line.

The major averages eventually ended the session mixed. While the Dow rose 44.95 points or 0.2 percent to 25,064.36, the Nasdaq dipped 20.26 points or 0.3 percent to 7,805.72 and the S&P 500 edged down 2.88 points or 0.1 percent to 2,798.43.

The choppy trading on Wall Street came as traders seemed reluctant to make significant moves ahead of the release of quarterly financial results from a number of big-name companies this week.

Goldman Sachs (GS), Johnson & Johnson (JNJ), Morgan Stanley (MS), American Express (AXP), IBM Corp. (IBM), Microsoft (MSFT), and General Electric (GE) are among the companies due to report their results in the coming days.

Nonetheless, traders largely refrained from cashing in on last week's gains after a report from the Commerce Department showed retail sales in the U.S. increased in line with economist estimates in the month of June.

The report said retail sales climbed by 0.5 percent in June after soaring by an upwardly revised 1.3 percent in May. Economists had expected sales to rise by 0.5 percent compared to the 0.8 percent increase originally reported for the previous month.

Excluding a jump in auto sales, retail sales still rose by 0.4 percent in June following a 1.4 percent spike in May. The increase in ex-auto sales also matched economist estimates.

A separate report from the Federal Reserve Bank of New York showed New York manufacturing activity continued to grow at a fairly brisk pace in July, although the pace of growth slowed from the previous month.

While the New York Fed said its general business conditions index dipped to 22.6 in July from 25.0, a positive reading still indicates growth in regional manufacturing activity. Economists had expected the index to drop to 22.0.

The Commerce Department also released a report showing business inventories increased in line with economist estimates in the month of May.

Sector News

Many of the major sectors showed only modest moves on the day, although considerable weakness was visible among energy stocks.

The sell-off by energy stocks came amid a sharp drop by the price of crude oil, as crude for August delivery plunged $2.95 to $68.06 a barrel.

Reflecting the weakness in the energy sector, the NYSE Arca Natural Gas Index plunged by 2 percent, while the Philadelphia Oil Service Index and the NYSE Arca Oil Index slumped by 1.7 percent and 1.5 percent, respectively.

Significant weakness is also visible among tobacco stocks, as reflected by the 2.9 percent drop by the NYSE Arca Tobacco Index.

Biotechnology and transportation stocks also moved notably lower, while Bank of America (BAC) helped lead the banking sector higher after reporting better than expected second quarter results

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved mostly lower during trading on Monday, with the Japanese markets closed for a holiday. China's Shanghai Composite Index slid by 0.6 percent, while Australia's S&P/ASX 200 Index fell by 0.4 percent.

Meanwhile, the major European markets turned in a mixed performance on the day. While the German DAX Index edged up by 0.2 percent, the French CAC 40 Index fell by 0.4 percent and the U.K.'s FTSE 100 Index slid by 0.8 percent.

In the bond market, treasuries climbed off their worst levels of the day but still closed in negative territory. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, rose by 2.7 basis points to 2.858 percent.

Looking Ahead

On Tuesday, traders are likely to keep a close eye on Federal Reserve Chairman Jerome Powell's testimony before the Senate Banking Committee, looking for clues about the outlook for interest rates.

Trading could also be impacted by reaction to reports on industrial production in June and homebuilder confidence in July.

On the earnings front, video streaming service Netflix (NFLX) is due to release its second quarter results after the close of today's trading.

Goldman Sachs (GS), Johnson & Johnson (JNJ), and UnitedHealth (UNH) are also among the companies scheduled to report their results before the start of trading on Tuesday.

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