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Stocks May See Initial Weakness Amid Light Trading - U.S. Commentary


Following the weakness seen in the two previous sessions, stocks may see some further downside during trading on Monday. The major index futures are currently pointing to a lower open for the markets, with the Dow futures down by 103 points.

The downward momentum on Wall Street comes on the heels of substantial weakness in the overseas markets, with Chinese stocks showing a particularly steep drop following a week-long holiday.

The sell-off in China came as investors brushed aside a move by the People's Bank of China to cut the reserve requirements for banks in order to lower financing costs and spur growth amid the trade war with the U.S.

Lingering concerns about the outlook for interest rates may also weigh on stocks following the recent advance by treasury yields.

The yield on the ten-year note climbed to its highest closing level in over seven years last Friday on the heels of the release of the monthly jobs report.

Trading activity is likely to be somewhat subdued, however, as some traders are likely to be away from their desks due to the Columbus Day holiday.

While the stock markets will remain open, banks, federal offices, and the bond markets are all closed on the day.

The holiday will lead to a lack of U.S. economic data, although reports on producer and consumer prices are likely to attract attention in the coming days along with speeches by several Federal Reserve officials.

After falling sharply in morning trading on Friday, stocks regained some ground in the afternoon but still ended the day mostly lower. With the drop on the day, the major averages added to the notable losses posted in the previous session.

The major averages ended the day firmly in negative territory but well off their lows of the session. The Dow slid 180.43 points or 0.7 percent to 26,447.05, the Nasdaq tumbled 91.06 points or 1.2 percent to 7,788.45 and the S&P 500 fell 16.04 points or 0.6 percent to 2,885.57.

For the week, the Dow edged down by less than a tenth of a percent, while the S&P 500 slumped by 1 percent and the Nasdaq plunged by 3.2 percent to its lowest closing level in well over a month.

In overseas trading, stock markets across the Asia-Pacific region saw significant weakness during trading on Monday, although the Japanese markets were closed for a holiday. China's Shanghai Composite Index plummeted by 3.7 percent, while Hong Kong's Hang Seng Index tumbled by 1.4 percent.

The major European markets have also moved to the downside on the day. While the French CAC 40 Index has slumped by 1 percent, the German DAX Index is down by 0.9 percent and the U.K.'s FTSE 100 Index is down by 0.7 percent.

In commodities trading, crude oil futures are tumbling $1.07 to $73.27 a barrel after inching up $0.01 to $74.34 a barrel last Friday. Meanwhile, an ounce of gold is trading at $1,188.90 down $16.70 from the previous session's close of $1,205.60. On Friday, gold climbed $4.00.

On the currency front, the U.S. dollar is trading at 113.41 yen compared to the 113.72 yen it fetched at the close of New York trading on Friday. Against the euro, the dollar is valued at $1.1471 compared to last Friday's $1.1524.

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