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U.S. Stocks Seeing Modest Weakness Following Recent Strength

wallstreet aug20 15aug22 lt

Stocks are seeing modest weakness in morning trading on Monday, giving back ground following the strong upward move seen last Friday. The major averages have all moved to the downside, although selling pressure has remained somewhat subdued.

Currently, the major averages are well off their lows of the session but still in negative territory. The Dow is down 29.88 points or 0.1 percent at 33,731.17, the Nasdaq is down 22.54 points or 0.2 percent at 13,024.65 and the S&P 500 is down 8.66 points or 0.2 percent at 4,271.49.

Lingering concerns about the global economy have contributed to the pullback on Wall Street after the release of weak Chinese industrial output, retail sales and fixed-asset investment data.

A surprise interest rate cut by China's central bank has added to concerns about slowing growth in the world's second largest economy.

Traders may be using the economic worries as an opportunity to cash in on last week's strong gains, which lifted the major averages to their best levels in three months.

Adding to the negative sentiment, the New York Federal Reserve released a report unexpectedly showing a substantial contraction in regional manufacturing activity in the month of August.

The New York Fed said its general business conditions index plummeted to a negative 31.3 in August from a positive 11.1 in July, with a negative reading indicating a contraction in regional manufacturing activity.

Economists had expected the index to show a much more modest decrease to a positive 8.5.

Looking ahead, the New York Fed said firms did not expect much improvement in business conditions over the next six months.

A separate report released by the National Association of Home Builders unexpectedly showed a continued deterioration in U.S. homebuilder confidence in the month of August.

The report showed the NAHB/Wells Fargo Housing Market Index dropped to 49 in August from 55 in July. Economists had expected the index to come in unchanged.

With the unexpected decrease, the housing market index fell below the key break-even measure of 50 for the first time since May 2020.

Energy stocks have moved sharply lower on the day, with a steep drop by the price of crude oil weighing on the sector. Crude for September delivery is currently plunging $3.67 to $88.42 a barrel.

Reflecting the weakness in the energy sector, the Philadelphia Oil Service Index is down by 4.8 percent, the NYSE Arca Oil Index is down by 3.4 percent and the NYSE Arca Natural Gas Index is down by 2.1 percent.

Substantial weakness is also visible among steel stocks, as reflected by the 2.6 percent nosedive by the NYSE Arca Steel Index. The index is pulling back off its best closing level in two months.

Gold and banking stocks have also shown notable moves to the downside, while airline stocks are extending a recent upward trend.

In overseas trading, stock markets across the Asia-Pacific region turned in a mixed performance during trading on Monday. Japan's Nikkei 225 Index jumped by 1.1 percent, while Hong Kong's Hang Seng Index slid by 0.7 percent.

Meanwhile, the major European markets are seeing modes strength on the day. While the U.K.'s FTSE 100 Index is just above the unchanged line, the German DAX Index and the French CAC 40 Index are both up by 0.1 percent.

In the bond market, treasuries are extending the rebound seen in the previous session. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, is down by 7 basis points at 2.779 percent.

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