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U.S. Stocks Finish Lackluster Session Modestly Lower

wallstreet aug20 07jan20 lt

Following the rebound seen over the course of the previous session, stocks turned in a relatively lackluster performance during trading on Tuesday. The Nasdaq spent the day bouncing back and forth across the unchanged line, although the Dow and the S&P 500 remained stuck in the red.

The major averages all eventually finished the day modestly lower. The Dow slid 119.70 points or 0.4 percent to 28,583.68, the Nasdaq edged down 2.88 points or less than a tenth of a percent to 9,068.58 and the S&P 500 fell 9.10 points or 0.3 percent to 3,237.18.

The choppy trading on Wall Street came amid uncertainty about the impact of rising tensions between the U.S. and Iran following the U.S. airstrike that killed top Iranian military commander Qasem Soleimani.

Iran has vowed to take revenge against the U.S. for the killing of Soleimani, but the lack of an immediate response has offset some of the worries that plagued the markets last Friday.

While traders generally seem optimistic that the war of words between Washington and Tehran will not escalate into a full-fledged military conflict, the uncertainty has kept buying interest in check.

On the U.S. economic front, the Commerce Department released a report showing the U.S. trade deficit shrank to its smallest level in three years in the month of November.

The report said the trade deficit narrowed to $43.1 billion in November from a revised $46.9 billion in October. Economists had expected the deficit to narrow to $43.8 billion from the $47.2 billion originally reported for the previous month.

The narrower trade deficit came as the value of exports climbed by 0.7 percent to $208.6 billion, while the value of imports slumped by 1.0 percent to $251.7 billion.

A separate report from the Institute for Supply Management showed service sector activity in the U.S. grew at a faster than expected pace in the month of December.

The ISM said its non-manufacturing index climbed to 55.0 in December after dipping to 53.9 in November, with a reading above 50 indicating growth in the service sector. Economists had expected the index to inch up to 54.5.

"The non-manufacturing sector had an uptick in growth in December," said Anthony Nieves, Chair of the ISM Non-Manufacturing Business Survey Committee.

"The respondents are positive about the potential resolution on tariffs," he added. "Capacity constraints have eased a bit; however, respondents continue to have difficulty with labor resources."

Sector News

Most of the major sectors ended the day showing only modest moves, although significant weakness was visible among oil service stocks.

The Philadelphia Oil Service Index slumped by 1.8 percent after ending the previous session at its best closing level in nearly six-months.

Oil service stocks pulled back along with the price of crude oil, with crude for February delivery sliding $0.57 to $62.70 after reaching a seven-month high on Monday.

Commercial real estate and telecom stocks also saw notable weakness on the day, although selling pressure was somewhat subdued.

On the other hand, semiconductor stocks turned in a strong performance, resulting in a 1.8 percent jump by the Philadelphia Semiconductor Index.

Chipmaker Microchip Technology (MCHP) led the way higher after forecasting fiscal third quarter revenues towards the high end of its previous guidance.

Other Markets

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 1.6 percent, while China's Shanghai Composite Index climbed by 0.7 percent.

Meanwhile, the major European markets finished the day mixed. While the German DAX Index advanced by 0.8 percent, the French CAC 40 Index and the U.K.'s FTSE 100 Index both closed just below the unchanged line.

In the bond market, treasuries moved modestly lower over the course of the trading session. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, inched up by 1.6 basis points to 1.827 percent.

Looking Ahead

A report on private sector employment may attract some attention on Wednesday, although trading activity may remain somewhat subdued ahead of the release of the Labor Department's more closely watched monthly jobs report on Friday.

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