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Stocks Fluctuating Amid Lingering Economic Uncertainty - U.S. Commentary


On the heels of the sell-off seen last Friday, stocks have fluctuated over the course of the trading session on Monday. The major averages have spent the day bouncing back and forth across the unchanged line.

Currently, the major averages are in negative territory. The Dow is down 56.28 points or 0.2 percent at 25,446.04, the Nasdaq is down 28.65 points or 0.4 percent at 7,614.01 and the S&P 500 is down 7.50 points or 0.3 percent at 2,739.21.

The choppy trading on Wall Street comes as traders seem reluctant to make more significant moves amid a quiet day on the U.S. economic front.

Reports on housing starts, consumer confidence, pending home sales, personal income and spending and new home sales are likely to attract attention in the coming days.

Traders are also likely to keep an eye on the latest round of high-level trade talks between the U.S. and China set to take place in Beijing this week.

Meanwhile, lingering concerns about the outlook for the economy continue to weigh on the markets after dragging stocks sharply lower last Friday.

An inversion of the yield curve has contributed to the recent selling pressure, with the yield on the benchmark ten-year note falling below the yield on three-month bills.

The inverted yield curve has not occurred since 2007 and is seen by many as an indication that a recession is on the way.

The U.S. has thus far held up relatively well amid a global economic slowdown, although Federal Reserve Chairman Jerome Powell has warned about the negative impact slowing growth in Europe and China will have on the U.S.

Powell's comments came after the Fed revealed that it no longer expects to raise interest rates this year, which some analysts described as an effort to keep the stock markets afloat amid an expected contraction in first quarter earnings.

Semiconductor stocks continue to see significant weakness in afternoon trading, with the Philadelphia Semiconductor Index slumping by 1.7 percent. The index continues to give back ground after reaching its best closing level in a year last Thursday.

Notable weakness also remains visible among computer hardware stocks, as reflected by the 1.4 percent loss being posted by the NYSE Arca Computer Hardware Index.

Oil service stocks are also seeing considerable weakness amid a modest decrease by the price of crude oil, while gold stocks are moving higher along with the price of the precious metal.

In overseas trading, stock markets across the Asia-Pacific region moved sharply lower during trading on Monday. Japan's Nikkei 225 Index nosedived by 3 percent, while Hong Kong's Hang Seng Index slumped by 2 percent.

The major European markets have shown more modest moves to the downside on the day. While the U.K.'s FTSE 100 Index has dipped by 0.3 percent, the French CAC 40 Index and the German DAX Index are both down by 0.1 percent.

In the bond market, treasuries are extending the rally seen in the previous session. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, is down by 3.9 basis points at 2.416 percent.

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