U.S. Stocks Move Modestly Higher Amid Cautious Trading
After showing a lack of direction early in the session, stocks have moved modestly higher over the course of the trading day on Monday. The major averages have all moved to the upside, although buying interest has remained relatively subdued.
Currently, the major averages are hovering above the unchanged line. The Dow is up 84.29 points or 0.2 percent at 34,702.53, the Nasdaq is up 35.68 points or 0.3 percent at 13,744.01 and the S&P 500 is up 12.94 points or 0.3 percent at 4,463.26.
The modest strength has emerged on Wall Street may partly reflect a pullback by treasury yields, with the yield on the benchmark ten-year note bouncing back near the unchanged after reaching a nearly one-month high in early trading.
Meanwhile, traders continue to look ahead to the Federal Reserve’s highly anticipated monetary policy announcement on Wednesday.
The Fed is widely expected to leave interest rates unchanged, but traders will pay close attention to the accompanying statement and the central bank’s projections for clues about the outlook for rates.
While CME Group’s FedWatch Tool is currently indicating a 99.0 percent chance the Fed will leave rates unchanged this week, the outlook for the November meeting is somewhat more mixed.
The FedWatch Tool is indicating a 69.0 percent chance rates will remain unchanged in November but a 30.7 percent chance of another quarter point rate hike.
“How the Fed delivers the pause is crucial for November and December rate expectations, but whether it’s presented with a dovish or hawkish tilt is what matters most for financial markets,” said Quincy Krosby, Chief Global Strategist for LPL Financial. “The Fed, and Fed Chair Powell particularly, will emphasize that they remain data dependent.”
She added, “Financial markets are even more keenly data dependent, and the wrapping of the pause, with a dovish or hawkish angle, is key for the market’s direction.”
On the U.S. economic front, the National Association of Home Builders released a report showing homebuilder confidence in the U.S. has unexpectedly deteriorated in the month of September.
The report said the NAHB/Wells Fargo Housing Market Index slumped to 45 in September after tumbling to 50 in August. Economists had expected the index to come in unchanged.
The housing market index dropped below the key breakeven measure of 50 for the first time in five months, as persistently high mortgage rates above 7 percent continue to erode builder confidence.
Despite the uptick by the broader markets, most of the major sectors are showing only modest moves on the day.
Housing and gold stocks are seeing some strength in afternoon trading, while weakness remains visible among biotechnology and airline stocks.
In overseas trading, stock markets across the Asia-Pacific region moved mostly lower on Monday, with the Japanese markets closed for a holiday. Hong Kong’s Hang Seng Index tumbled by 1.4 percent and South Korea’s Kospi slumped by 1.0 percent, while China’s Shanghai Composite Index bucked the downtrend and rose by 0.3 percent.
The major European markets also moved to the downside on the day. While the French CAC 40 Index plunged by 1.4 percent, the German DAX Index dove by 1.1 percent and the U.K.’s FTSE 100 Index fell by 0.7 percent.
In the bond market, treasuries have climbed back near the unchanged line after seeing early weakness. 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 4.317 percent.
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