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Stocks Extending Last Friday's Sell-Off In Morning Trading - U.S. Commentary


Stocks have moved mostly lower in morning trading on Monday, extending the sell-off seen in the previous session. The Nasdaq and the S&P 500 are pulling back further off last Thursday's five-month closing highs.

The major averages have climbed off their worst levels in recent trading but remain in negative territory. The Dow is down 40.75 points or 0.2 percent at 25,461.57, the Nasdaq is down 29.51 points or 0.4 percent at 7,613.16 and the S&P 500 is down 5.81 points or 0.2 percent at 2,794.90.

Lingering concerns about the outlook for the economy continue to weigh on the markets after dragging stocks sharply lower last Friday.

An inversion of the yield curve has contributed to the recent selling pressure, with the yield on the benchmark ten-year note falling below the yield on three-month bills.

The inverted yield curve has not occurred since 2007 and is seen by many as an indication that a recession is on the way.

The U.S. has thus far held up relatively well amid a global economic slowdown, although Federal Reserve Chairman Jerome Powell has warned about the negative impact slowing growth in Europe and China will have on the U.S.

Powell's comments came after the Fed revealed that it no longer expects to raise interest rates this year, which some analysts described as an effort to keep the stock markets afloat amid an expected contraction in first quarter earnings.

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

Reports on housing starts, consumer confidence, pending home sales, personal income and spending and new home sales are likely to attract attention in the coming days.

Traders are also likely to keep an eye on the latest round of high-level trade talks between the U.S. and China set to take place in Beijing this week.

Tobacco stocks are turning in some of the market's worst performances in morning trading, dragging the NYSE Arca Tobacco Index down by 1.6 percent.

Considerable weakness has also emerged among oil service stocks, as reflected by the 1.5 percent slump by the Philadelphia Oil Service Index.

The weakness in the oil service sector comes amid a decrease by the price of crude oil, with crude for May delivery sliding $0.72 to $58.32 a barrel.

Semiconductor, computer hardware, and networking stocks are also seeing notable weakness, while gold stocks are bucking the downtrend.

In overseas trading, stock markets across the Asia-Pacific region moved sharply lower during trading on Monday. Japan's Nikkei 225 Index nosedived by 3 percent, while Hong Kong's Hang Seng Index slumped by 2 percent.

The major European markets have shown more modest moves to the downside on the day. While the U.K.'s FTSE 100 Index has slid by 0.7 percent, the French CAC 40 Index and the German DAX Index are both down by 0.4 percent.

In the bond market, treasuries are extending the rally seen in the previous session. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, is down by 2.7 basis points at 2.428 percent.

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