U.S. Stocks Climb Well Off Worst Levels But Close In The Red

Stocks regained ground after an early move to the downside on Monday but still ended the day in negative territory. The major averages partly offset the notable rebound seen to close out the previous week.

After falling by as much as 200 points, the Dow ended the day down by just 54.34 points or 0.2 percent at 34,327.79. The Nasdaq slid 50.93 points or 0.4 percent to 13,379.05 and the S&P 500 fell 10.56 points or 0.3 percent to 4,163.29.

Lingering concerns about inflation and the outlook for monetary policy weighed on Wall Street ahead of the release of the minutes of the Federal Reserve’s latest monetary policy meeting on Wednesday.

Traders are likely to closely analyze the Fed minutes for indications officials are growing concerned about the recent acceleration in inflation and considering tapering asset purchases.

The Fed has repeatedly signaled that it believes the increase in inflation largely reflects “transitory factors,” although the spike in consumer prices reported by the Labor Department last week still helped trigger a sell-off on Wall Street.

The pullback seen on the day came after the rebound seen last Thursday and Friday lifted the major averages off their lowest closing levels in over a month.

In U.S. economic news, the Federal Reserve Bank of New York released a report showing its index of regional manufacturing activity pulled back modestly in May after jumping to a more than three-year high in the previous month.

The New York Fed said its general business conditions index dipped to 24.3 in May from 26.3 in April, although a positive reading still indicates growth in regional manufacturing activity.

Economists had expected the index to slip to 23.9 after reaching its highest level since October of 2017 in the previous month.

Meanwhile, the National Association of Home Builders released a separate report showing homebuilder confidence in the U.S. held stable in the month of May.

The report showed the NAHB/Wells Fargo Housing Market Index came in at 83 in May, unchanged from April. The unchanged reading matched economist estimates.

Sector News

Despite the lower close by the major averages, gold stocks showed a substantial move to the upside on the day, driving the NYSE Arca Gold Bugs Index up by 5.5 percent to its best closing level in over six months.

The rally by gold stocks came amid a sharp increase by the price of the precious metal, with gold for June delivery spiking $29.50 to $1,867.60 an ounce.

A notable increase by the price of crude oil also contributed to strength among energy stocks, as crude for June delivery climbed $0.90 to $66.27 a barrel.

Computer hardware stocks also turned in a strong performance on the day, resulting in a 1.5 percent advance by the NYSE Arca Computer Hardware Index.

On the other hand, software, utilities and biotechnology stocks moved to the downside, offsetting the strength seen in the aforementioned sectors.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region turned in a mixed performance during trading on Monday. Japan’s Nikkei 225 Index slid by 0.9 percent, while China’s Shanghai Composite Index advanced by 0.8 percent.

Meanwhile, the major European markets all saw modest weakness on the day. While the French CAC 40 Index dipped by 0.3 percent, the U.K.’s FTSE 100 Index and the German DAX Index edged down by 0.2 percent and 0.1 percent, respectively.

In the bond market, treasuries showed a lack of direction following the volatility seen last week. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, inched up by less than a basis point to 1.640 percent.

Looking Ahead

Earnings news is likely to attract attention on Tuesday, with retail giants Walmart (WMT), Home Depot (HD) and Macy’s (M) among the companies releasing their quarterly results before the start of trading.

Traders are also likely to keep an eye on the Commerce Department’s report on new residential construction in the month of April.

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