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Stocks Climb Off Worst Levels But Remain Firmly Negative - U.S. Commentary


Stocks have climbed off their worst levels of the day but remain mostly lower in mid-day trading on Monday. The sell-off seen earlier in the day dragged the Dow and the S&P 500 down to their lowest intraday levels in seven and eight months, respectively.

Currently, the major averages remain firmly in negative territory. The Dow is down 402.08 points or 1.7 percent at 23,986.87, the Nasdaq is down 45.01 points or 0.7 percent at 6,924.24 and the S&P 500 is down 35.84 points or 1.4 percent at 2,597.24.

The continued weakness on Wall Street reflects lingering concerns about the global economic outlook along with skepticism about the potential for a long-term trade deal between the U.S. and China.

Negative sentiment was generated by the release of a report from the Chinese customs office showing slower export growth.

Chinese exports rose 5.4 percent in November from a year earlier, marking the weakest performance since a contraction in March. Import growth stood at 3 percent, the slowest since October of 2016.

Data showing that the Japanese economy contracted the most in over four years in the third quarter also added to investor worries over slowing global growth.

Overall trading activity is somewhat subdued, however, with a lack of major U.S. economic data keeping some traders on the sidelines.

The economic calendar remains relatively light throughout the week, although reports on producer and consumer price inflation, retail sales, and industrial production are likely to attract attention in the coming days.

Traders may nonetheless remain reluctant to make significant moves ahead of the Federal Reserve's monetary policy meeting next week.

With the Fed widely expected to raise interest rates by another quarter point, traders will closely scrutinize the accompanying statement for clues about future rate hikes.

Sector News

Energy stocks have moved sharply lower over the course of the session, with a pullback by the price of crude oil weighing on the sector. Crude for January delivery is sliding $0.95 to $51.66 a barrel after jumping $1.12 to $52.61 a barrel last Friday.

Reflecting the weakness in the energy sector, the Philadelphia Oil Service Index is down by 3.8 percent, while the NYSE Arca Oil Index and the NYSE Arca Natural Gas Index are both down by 3.3 percent.

Substantial weakness also remains visible among banking stocks, as reflected by the 3.2 percent slump by the KBW Bank Index. The index has fallen to its lowest intraday level in well over a year.

Steel, telecom, and transportation stocks are also seeing considerable weakness, while gold stocks continue to buck the downtrend despite a modest decrease by the price of the precious metal.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved notably lower during trading on Monday. Japan's Nikkei 225 Index plunged by 2.1 percent, while Hong Kong's Hang Seng Index tumbled by 1.2 percent.

The major European markets also moved to the downside on the day. While the U.K.'s FTSE 100 Index fell by 0.8 percent, the French CAC 40 Index and the German DAX Index both slumped by 1.5 percent.

In the bond market, treasuries are showing a lack of direction after trending higher in recent sessions. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, is down by less than a basis point at 2.845 percent.

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