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U.S. Stocks Regain Ground After Initial Move To The Downside

wallstreet oct03 18oct21 lt

After an initial move to the downside, stocks have regained ground over the course of morning trading on Monday. The major averages have bounced well off their lows of the session, with the Nasdaq and the S&P 500 reaching positive territory.

Currently, the major averages are turning in a mixed performance. While the Dow is down 57.02 points or 0.2 percent at 35,237.74, the Nasdaq is up 16.41 points or 0.1 percent at 14,913.75 and the S&P 500 is up 1.94 points or less than a tenth of a percent at 4,473.31.

The initial weakness on Wall Street partly reflected profit taking following recent strength in the markets, which lifted the Dow and the S&P 500 to their best closing levels in a month last Friday.

Worries about the global economic outlook also weighed on the markets after data showed the Chinese economy hit its slowest pace of growth in a year in the third quarter, hurt by power shortages, supply bottlenecks, sporadic Covid-19 outbreaks and major wobbles in the property sector.

China's GDP expanded 4.9 percent year-on-year in the third quarter of 2021, the National Bureau of Statistics said, missing forecasts for 5.2 percent and down sharply from 7.9 percent in the three months prior.

An advance by Treasury yields also contributed to the initial drop, although selling pressure waned as yields pulled back well off their highs.

The pullback by treasury yields came after the Federal Reserve released a report unexpectedly showing a steep drop in industrial production in the month of September.

The Fed said industrial production tumbled by 1.3 percent in September following a revised 0.1 percent dip in August.

The sharp decline surprised economists, who had expected industrial production to edge up by 0.2 percent compared to the 0.4 percent increase originally reported for the previous month.

The report said manufacturing output fell by 0.7 percent, with the production of motor vehicles and parts plunging by 7.2 percent amid the semiconductor shortage.

Utilities output also plummeted by 3.6 percent, as demand for cooling subsided after a warmer-than-usual August, while mining production slumped by 2.3 percent due to the lingering effects of Hurricane Ida.

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

Oil service stocks have shown a significant move to the upside, however, with the Philadelphia Oil Service Index jumping by 2 percent.

The rally by oil service stocks comes as the price of crude oil for November delivery is climbing $0.41 to $82.69 a barrel.

Notable strength is also visible among natural gas stocks, as reflected by the 1.2 percent gain being posted by the NYSE Arca Natural Gas Index.

On the other hand, biotechnology stocks have come under pressure on the day, dragging the NYSE Arca Biotechnology Index down by 1.6 percent.

In overseas trading, stock markets across the Asia-Pacific region turned in a mixed performance during trading on Monday. Japan's Nikkei 225 Index dipped by 0.2 percent, while Hong Kong's Hang Seng Index rose by 0.3 percent.

The major European markets have also moved to the downside on the day. While the U.K.'s FTSE 100 Index has fallen by 0.5 percent, the French CAC 40 Index and the German DAX Index are both down by 0.9 percent.

In the bond market, treasuries have bounced back near the unchanged line after seeing early weakness. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, is up by less than a basis point at 1.584 percent after reaching a high of 1.627 percent.

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