U.S. Stocks Lack Direction After Recovering From Early Lows

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After recovering from an initial move to the downside, stocks have shown a lack of direction over the course of the trading session on Monday. The major averages bounced well off their early lows and have spent the rest of the session lingering near the unchanged line.

Currently, the major averages are posting modest losses on the day. The Dow is down 24.92 points or 0.1 percent at 30,797.50, the Nasdaq is down 14.44 points or 0.1 percent at 11,433.96 and the S&P 500 is down 4.67 points or 0.1 percent at 3,868.66.

Lingering concerns about the outlook for the global economy contributed to the initial weakness on Wall Street after last week's warning from FedEx (FDX).

Selling pressure waned shortly after the start of trading, however, enabling traders to pick up stocks at reduced levels following recent weakness.

The recovery attempt by the major averages came after they pulled back near the two-month intraday lows set last Friday.

At the same time, buying interest has remained somewhat subdued as traders look ahead to the Federal Reserve's highly anticipated monetary policy announcement on Wednesday.

"It is difficult to be buying up stocks with this lousy macro backdrop, persistent inflation pressures, global growth weakness, and slashed earnings outlooks," said Edward Moya, senior market analyst at OANDA.

"Pessimism for equities remains elevated as the U.S. economy appears to have a one-way ticket towards a recession as the Fed is poised to remain aggressive," he added. "The risks for a retest of the summer lows could easily happen if the Fed remains fully committed with their inflation fight."

The Fed is widely expected to raise interest rates by another 75 basis points, although some see an outside chance for a 100 basis point rate hike.

CME Group's FedWatch Tool is currently indicating an 84.0 percent chance of a 75 basis points rate hike and a 16.0 percent chance of a 100 basis point rate hike,

A number of other major central banks around the world are also scheduled to announce their latest monetary policy decisions this week, including the Bank of England and the Bank of Japan.

Sector News

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

Computer hardware stocks have shown a significant move to the downside, however, with the NYSE Arca Computer Hardware Index slumping by 2.2 percent to a two-month intraday low.

Healthcare, pharmaceutical and biotechnology stocks have also moved notably lower, although selling pressure has waned from early in the session.

On the other hand, airline stocks have moved sharply higher on the day, with the NYSE Arca Airline Index soaring by 2.7 percent after ending last Friday's trading at its lowest closing level in well over a month.

Steel stocks are also turning in a strong performance in afternoon trading, resulting in a 2.1 percent jump by the NYSE Arca Steel Index.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved mostly lower during trading on Monday, with the Japanese markets closed for a holiday. China's Shanghai Composite Index fell by 0.4 percent, while Hong Kong's Hang Seng Index slumped by 1.0 percent.

Meanwhile, the major European markets turned in a mixed performance on the day. While the German DAX Index rose by 0.3 percent, the French CAC 40 Index dipped by 0.3 percent and the U.K.'s FTSE 100 Index decreased by 0.6 percent.

In the bond market, treasuries have climbed off their worst levels but remain in negative territory. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, is up by 2.1 basis points at 3.469 percent after reaching a high of 3.510 percent.

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