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Major Averages Close Mixed For Second Straight Session - U.S. Commentary


Stocks fluctuated over the course of the trading session on Monday after failing to sustain an initial move to the upside. The major averages showed a lack of direction before closing on opposite sides of the unchanged line for the second consecutive session.

While the Nasdaq rose 19.60 points or 0.3 percent to 7,468.63, the Dow slid 126.93 points or 0.5 percent to 25,317.41 and the S&P 500 fell 11.90 points or 0.4 percent to 2,755.88.

The choppy trading on Wall Street came as traders expressed some uncertainty about the near-term outlook for the markets following recent volatility.

A lack of major U.S. economic data also kept some traders on the sidelines ahead of the release of reports on new home sales, durable goods orders, and consumer sentiment in the coming days.

The Federal Reserve is also due to release its Beige Book, a compilation of anecdotal evidence on economic conditions in the twelve Fed districts. The report may shed additional light on the outlook for interest rates.

Stocks initially benefited from a continued rally in China, with Chinese stocks extending the substantial rebound seen last Friday.

Chinese stocks surged higher amid optimism about additional stimulus to stimulate the world's second largest economy after last week's disappointing GDP data.

After three top Chinese financial regulators stepped in to bolster investor confidence last Friday, Chinese President Xi Jinping vowed "unwavering" support for the country's private sector.

In an open letter published in state media, Xi said Beijing would continue to value and protect the country's private business owners to ensure a "better tomorrow."

Buying interest waned shortly after the start of trading, however, as traders remain concerned about global economic growth and recent geopolitical tensions.

Sector News

Banking stocks moved sharply lower over the course of the session, dragging the KBW Bank Index down by 2.7 percent. With the steep drop, the index fall to its lowest closing level in over a year.

Significant weakness was also visible among natural gas stocks, as reflected by the 2.2 percent slump by the NYSE Arca Natural Gas Index. The index tumbled to a five-month closing low.

The sell-off by natural gas stocks came amid a notable decrease by the price of the commodity, with natural gas for November delivery falling $0.112 to $3.138 per million BTUs.

Housing, biotechnology, and tobacco stocks also saw considerable weakness on the day, while strength among software and computer hardware stocks contributed to the gain posted by the tech-heavy Nasdaq.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved mostly higher during trading on Monday. Japan's Nikkei 225 Index rose by 0.4 percent, while Hong Kong's Hang Seng Index surged up by 2.3 percent.

Meanwhile, the major European markets moved to the downside on the day. While the U.K.'s FTSE 100 Index edged down by 0.1 percent, the German DAX Index fell by 0.3 percent and the French CAC 40 Index slid by 0.6 percent.

In the bond market, treasuries showed a lack of direction for much of the session before closing roughly flat. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, dipped less than a basis point to 3.196 percent.

Looking Ahead

Amid another quiet day on the U.S. economic front, trading on Tuesday may be impacted by reaction to the latest earnings news.

3M (MMM), Caterpillar (CAT), Harley-Davidson (HOG), JetBlue (JBLU), McDonald's (MCD), United Technologies (UTX), and Verizon (VZ) are among the companies due to report their quarterly results before the start of trading on Tuesday.

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