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U.S. Stocks Show A Lack Of Direction Before Closing Mixed

wallstreet 05nov19 lt

After failing to sustain an early move to the upside, stocks showed a lack of direction over the course of trading session on Tuesday. The major averages spent the day bouncing back and forth across the unchanged line, although the Dow and the Nasdaq still crept up to new record closing highs.

The major averages finished the day on opposite sides of the unchanged line. While the S&P 500 edged down 3.65 points or 0.1 percent at 3,074.62, the Dow ticked up 30.52 points or 0.1 percent to 27,492.63 and the Nasdaq inched up 1.48 points or less than a tenth of a percent to 8,434.68.

The early strength on Wall Street came amid continued optimism about a potential U.S.-China trade deal, with President Donald Trump and Chinese President Xi Jinping widely expected to sign phase one of an agreement sometime this month.

As part of the deal, the U.S. is likely to scrap tariffs on about $156 billion worth of Chinese imports currently set to take effect on December 15th.

A report from the Financial Times said the U.S. is also considering China's request to lift the 15 percent tariff on about $125 billion worth of Chinese goods that went into effect on September 1st.

A person familiar with Beijing's negotiating position told Reuters that China is continuing to press Washington to "remove all tariffs as soon as possible."

Buying interest was somewhat subdued, however, as traders wait for more concrete developments before continuing to buy stocks following the recent run to record highs.

Stocks gave back ground following the release of a report from the Institute for Supply Management showing growth in U.S. service sector activity reaccelerated by more than anticipated in the month of October.

The ISM said its non-manufacturing index climbed to 54.7 in October from 52.6 in September, with a reading above 50 indicating growth in the service sector. Economists had expected the index to inch up to 53.2.

The better than expected data may have raised concerns about the outlook for interest rates after the Federal Reserve indicated last week that it is putting further rate cuts on hold.

A separate report released by the Commerce Department showed the U.S. trade deficit narrowed in the month of September, as the value of imports slumped by more than the value of exports.

The Commerce Department said the trade deficit narrowed to $52.5 billion in September from a revised $55.0 billion in August. The narrower deficit matched economist estimates.

The deficit shrank as the value of imports tumbled by 1.7 percent to $258.4 billion, while the value of exports slid by 0.9 percent to $206.0 billion.

Sector News

Most of the major sectors ended the day showing only modest moves, contributing to the lackluster close by the broader markets.

Gold stocks showed a significant move to the downside, however, with the NYSE Arca Gold Bugs Index slumping by 1.6 percent.

The weakness among gold stocks came amid a steep drop by the price of the precious metal, as gold for December plummeted $27.40 to $1,483.70 an ounce.

Interest rate-sensitive commercial real estate and utilities stocks also came under pressure over the course of the trading session.

On the other hand, tobacco stocks moved sharply higher on the day, driving the NYSE Arca Tobacco Index up by 2 percent to its best closing level in almost two months.

Notable strength was also visible among computer hardware stocks, as reflected by the 1.1 percent gain posted by the NYSE Arca Computer Hardware Index.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved mostly higher during trading on Tuesday. Japan's Nikkei 225 Index surged up by 1.8 percent as trading resumed after a long weekend, while China's Shanghai Composite Index climbed by 0.5 percent.

The major European markets showed more modest moves to the upside on the day. While the German DAX Index inched up by 0.1 percent, the U.K.'s FTSE 100 Index and the French CAC 40 Index rose by 0.3 percent and 0.4 percent, respectively.

In the bond market, treasuries extended the notable downward move seen over the two previous sessions. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, advanced 8 basis points at 1.866 percent.

Looking Ahead

Any news on the trade front is likely to be in focus on Wednesday, overshadowing a report on labor productivity and costs in the third quarter.

On the earnings front, CVS Health (CVS), Humana (HUM), Office Depot (ODP), and Wendy's (WEN) are among the companies due to report their quarterly results before the start of trading on Wednesday.

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