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Modest Weakness Remains Visible On Wall Street - U.S. Commentary


After moving to the downside early in the session, stocks continue to see modest weakness in mid-day trading on Monday. The Nasdaq and the S&P 500 are pulling back after ending last Friday's at six-month closing highs.

The major averages have moved roughly sideways in recent trading, lingering in negative territory. The Dow is down 69.37 points or 0.3 percent at 26,342.93, the Nasdaq is down 28.68 points or 0.4 percent at 7,955.48 and the S&P 500 is down 7.80 points or 0.3 percent at 2,899.61.

The weakness on Wall Street partly reflects a negative reaction to earnings news from Goldman Sachs (GS), with the financial giant sliding by 3.2 percent.

The drop by Goldman Sachs comes after the company reported better than expected first quarter earnings but revenues that missed expectations.

Shares of Citigroup (C) have also moved to the downside even though the company reported first quarter earnings that exceeded analyst estimates.

Nonetheless, traders seem reluctant to make more significant moves ahead of the release of quarterly results from a slew of other big-name companies in the coming days.

Bank of America (BAC), Johnson & Johnson (JNJ), IBM (IBM), Morgan Stanley (MS), PepsiCo (PEP), and American Express (AXP) are among the companies due to report their results this week.

The impending release of data on industrial production, retail sales, and housing starts may also keep some traders on the sidelines along with the holiday on Friday.

In economic news, the New York Federal Reserve released a report showing growth in regional manufacturing activity picked up somewhat in April but remained fairly subdued.

The New York Fed said its headline general business conditions index climbed to 10.1 in April after falling to 3.7 in March, with a positive reading indicating growth in regional manufacturing activity.

Sector News

Despite the weakness being shown by the broader markets, most of the major sectors are showing only modest moves in mid-day trading.

Biotechnology stocks have shown a notable move to the downside, however, with the NYSE Arca Biotechnology Index falling by 1.1 percent.

Banking, oil and semiconductor stocks are also seeing some weakness on the day, while substantial strength remains visible among computer hardware stocks.

Digital imaging company Electronics For Imaging (EFII) is soaring by 26.7 percent after agreeing to be acquired by an affiliate of Siris Capital in an all-cash transaction valued at approximately $1.7 billion.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region turned in a mixed performance during trading on Monday. Japan's Nikkei 225 Index surged up by 1.3 percent, while Hong Kong's hang Seng Index fell by 0.3 percent.

Meanwhile, European stocks saw modest strength on the day, although the U.K.'s FTSE 100 Index closed just below the unchanged line. The German DAX Index and the French CAC 40 Index edged up by 0.2 percent and 0.1 percent, respectively.

In the bond market, treasuries are roughly flat after moving notably lower over the two previous sessions. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, is down by less than a basis point at 2.553 percent.

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