U.S. Stocks Recover From Early Weakness Before Closing Narrowly Mixed

After recovering from an early move to the downside, stocks turned in a lackluster performance throughout much of the trading session on Monday. The major averages spent most of the afternoon lingering near the unchanged line.

The major averages eventually ended the day narrowly mixed. While the Dow inched up 54.77 points or 0.2 percent to 34,337.87, the Nasdaq dipped 30.36 points or 0.2 percent to 13,767.74 and the S&P 500 edged down 3.69 points or 0.1 percent to 4,411.55.

The early weakness on Wall Street came as some traders looked to cash in on last Friday’s rally, which lifted the tech-heavy Nasdaq to a nearly two-month closing high.

Negative sentiment was also generated in reaction to news credit rating agency Moody’s has lowered its outlook for the U.S.’ credit rating to negative from stable amid concerns about a possible government shutdown.

Moody’s reaffirmed the U.S. credit rating at Aaa but said it “expects that the U.S.’ fiscal deficits will remain very large, significantly weakening debt affordability.”

The selling pressure was partly offset by a report from the New York Federal Reserve showing a modest decrease in consumer inflation expectations.

The New York Fed said inflation expectations declined at the one-year and five-year ahead horizons in October, falling to 3.6 percent from 3.7 percent and to 2.7 percent from 2.8 percent, respectively.

Overall trading activity remained somewhat subdued, however, as traders looked ahead to the release of key inflation data in the coming days.

The inflation data could have a significant impact on the outlook for interest rates, with traders recently expressing optimism the Federal Reserve is done raising rates.

Sector News

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

Utilities stocks showed a significant move to the downside, however, with the Dow Jones Utility Average falling by 1.3 percent.

Notable weakness was also visible among semiconductor stocks, as reflected by the 1.0 percent drop by the Philadelphia Semiconductor Index.

On the other hand, tobacco stocks moved sharply higher on the day, driving the NYSE Arca Tobacco Index up by 2.3 percent.

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 inched up by 0.1 percent, while Australia’s S&P/ASX 200 Index fell by 0.4 percent.

Meanwhile, the major European markets all moved to the upside on the day. While the U.K.’s FTSE 100 Index advanced by 0.9 percent, the German DAX Index and the French CAC 40 Index climbed by 0.7 percent and 0.6 percent, respectively.

In the bond market, treasuries recovered from early weakness, closing roughly flat for the second straight session. 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 4.632 percent after reaching a high of 4.696 percent.

Looking Ahead

Trading on Tuesday is likely to be driven by reaction to the Labor Department’s report on consumer price inflation in the month of October.

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