U.S. Stocks Showing A Lack Of Direction In Morning Trading

wallstreet2 05nov19

After moving to the upside early in the session, stocks have shown a lack of direction over the course of morning trading on Tuesday. The major averages pulled back off their highs and have been bouncing back and forth across the unchanged line.

Currently, the major averages are posting modest losses. The Dow is down 0.54 points or less than a tenth of a percent at 27,461.57, the Nasdaq is down 10.39 points or 0.1 percent at 8,422.81 and the S&P 500 is down 5.96 points or 0.2 percent at 3,072.31.

The early strength on Wall Street came amid continued optimism about a potential U.S.-China trade deal, with President Donald Trump and Chinese President Xi Jinping widely expected to sign phase one of an agreement sometime this month.

As part of the deal, the U.S. is likely to scrap tariffs on about $156 billion worth of Chinese imports currently set to take effect on December 15th.

A report from the Financial Times said the U.S. is also considering China's request to lift the 15 percent tariff on about $125 billion worth of Chinese goods that went into effect on September 1st.

A person familiar with Beijing's negotiating position told Reuters that China is continuing to press Washington to "remove all tariffs as soon as possible."

Buying interest was somewhat subdued, however, as traders wait for more concrete developments before continuing to buy stocks following the recent run to record highs.

Stocks gave back ground following the release of a report from the Institute for Supply Management showing growth in U.S. service sector activity reaccelerated by more than anticipated in the month of October.

The ISM said its non-manufacturing index climbed to 54.7 in October from 52.6 in September, with a reading above 50 indicating growth in the service sector. Economists had expected the index to inch up to 53.2.

The better than expected data may have raised concerns about the outlook for interest rates after the Federal Reserve indicated last week that it is putting further rate cuts on hold.

A separate report released by the Commerce Department showed the U.S. trade deficit narrowed in the month of September, as the value of imports slumped by more than the value of exports.

The Commerce Department said the trade deficit narrowed to $52.5 billion in September from a revised $55.0 billion in August. The narrower deficit matched economist estimates.

The deficit shrank as the value of imports tumbled by 1.7 percent to $258.4 billion, while the value of exports slid by 0.9 percent to $206.0 billion.

Most of the major sectors are showing only modest moves, contributing to the lackluster performance by the broader markets.

Gold stocks have shown a significant move to the downside, however, with the NYSE Arca Gold Bugs Index slumping by 1.7 percent.

The weakness among gold stocks comes amid a steep drop by the price of the precious metal, as gold for December delivery is plunging $22.40 to $1,488.70 an ounce.

Commercial real estate and pharmaceutical stocks are also seeing notable weakness on the day, while strength is visible among tobacco and transportation stocks.

In overseas trading, stock markets across the Asia-Pacific region moved mostly higher during trading on Tuesday. Japan's Nikkei 225 Index surged up by 1.8 percent as trading resumed after a long weekend, while China's Shanghai Composite Index climbed by 0.5 percent.

Meanwhile, the major European markets have turned mixed on the day. While the German DAX Index has edged down by 0.1 percent, the French CAC 40 Index and the U.K.'s FTSE 100 Index are both up by 0.2 percent.

In the bond market, treasuries are extending the notable downward move seen over the two previous sessions. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, is up by 7.8 basis points at 1.864 percent.

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