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Major Averages Close On Opposite Sides Of Unchanged Line - U.S. Commentary


Following the sell-off seen in the previous session, stocks showed a lack of direction over the course of the trading day on Monday. The major averages spent the day bouncing back and forth across the unchanged line before closing mixed.

The major averages finished the day little changed. While the Dow inched up 14.51 points or 0.1 percent to 25,516.83, the Nasdaq dipped 5.13 points or 0.1 percent to 7,637.54 and the S&P 500 edged down 2.35 points or 0.1 percent to 2,798.36.

The choppy trading on Wall Street came as traders seemed 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 continued to weigh on the markets after dragging stocks sharply lower last Friday.

An inversion of the yield curve contributed to economic worries, 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.

Sector News

Most of the major sectors ended the day showing only modest moves, contributing to the lackluster close by the broader markets.

Gold stocks showed a substantial move to the upside, however, with the NYSE Arca Gold Bugs Index surging up by 2.3 percent to an eight-month closing high.

The rally by gold stocks came amid a notable increase by the price of the precious metal, as gold for April delivery jumped $10.30 to $1,322.60 an ounce.

Considerable strength also emerged among housing stocks, as reflected by the 1.2 percent gain posted by the Philadelphia Housing Sector Index.

On the other hand, semiconductor and computer hardware stocks saw notable weakness, dragging the Philadelphia Semiconductor Index and the NYSE Arca Computer Hardware Index down by 1.3 percent and 1.2 percent, respectively.

Other Markets

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 showed more modest moves to the downside on the day. While the U.K.'s FTSE 100 Index fell by 0.4 percent, the French CAC 40 Index and the German DAX Index both dipped by 0.2 percent.

In the bond market, treasuries extended the rally seen in the previous session. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, dropped by 3.5 basis points to a more than one-year closing low of 2.420 percent.

Looking Ahead

Trading on Tuesday may be impacted by reaction to the latest U.S. economic data, including reports on new residential construction and consumer confidence.

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