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U.S. Stocks Pull Back Further Off Record Highs

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Stocks came under pressure early in the trading session on Monday and remained mostly lower throughout the day. With the drop on the day, the major averages pulled back further off the record closing highs set last Wednesday.

The major averages ended the day firmly in negative territory but off their lows of the session. The Dow slid 115.98 points or 0.4 percent to 26,806.14, the Nasdaq slumped 63.41 points or 0.8 percent to 8,098.38 and the S&P 500 fell 14.46 points or 0.5 percent to 2,975.95.

The weakness on Wall Street partly reflected waning optimism about a near-term interest rate cut following last Friday's much better than expected jobs data.

CME Group's FedWatch Tool still points to a rate cut at the next Federal Reserve meeting later this month, although expectations have dramatically shifted toward a 25 basis point cut rather than a 50 basis point cut.

The shift came after the Labor Department's closely watched report showed employment jumped by 224,000 jobs in June compared to expectations for an increase of 160,000 jobs.

A notable drop by Apple (AAPL) also weighed on the markets, with the tech giant tumbling by 2.1 percent after Rosenblatt Securities downgraded its rating on the company's stock to Sell from Neutral.

Fellow Dow component Boeing (BA) also fell by 1.3 percent after Saudi Arabia's flyadeal became the first airline to officially cancel an order for the beleaguered aerospace giant's 737 MAX aircraft.

However, in light of the focus on the outlook for rates, overall trading activity was somewhat subdued ahead of Fed Chairman Jerome Powell's congressional testimony later this week.

Powell is due to testify before the House Financial Services Committee on Wednesday and before the Senate Banking Committee on Thursday.

Wednesday will also see the release of the minutes of the Fed's last monetary policy meeting, which may shed additional light on the central bank's decision to make notable changes to its accompanying statement.

Sector News

Biotechnology stocks moved sharply lower over the course of the trading session, resulting in a 1.8 percent slump by the NYSE Arca Biotechnology Index.

The biotechnology index continued to give back ground after ending last Wednesday's trading at its best closing level in well over two months.

Significant weakness was also visible among computer hardware stocks, as reflected by the 1.4 percent drop by the NYSE Arca Computer Hardware Index.

NetApp (NTAP) led the sector lower after Citigroup downgraded its rating on the data storage provider to Sell from Neutral.

Brokerage, networking, and steel stocks also saw considerable weakness on the day, moving to the downside along with most of the other major sectors.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved sharply lower during trading on Monday. Japan's Nikkei 225 Index slumped by 1 percent, while China's Shanghai Composite Index plunged by 2.6 percent.

The major European markets showed more modest moves to the downside on the day. While the German DAX Index dipped by 0.2 percent, the French CAC 40 Index and the U.K.'s FTSE 100 Index both edged down by 0.1 percent.

In the bond market, treasuries saw modest strength following the sharp pullback seen last Friday. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, edged down by 1.4 basis points to 2.034 percent.

Looking Ahead

Fed Chairman Powell is scheduled to deliver opening remarks at a Boston Fed conference on "Stress Testing" on Tuesday but may refrain from directly addressing interest rates.

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