U.S. Stocks Give Back Ground After Early Move To The Upside

After moving to the upside early in the session, stocks have given back ground over the course of the trading day on Monday. The major averages have pulled back well off their early highs and into negative territory.

Currently, the major averages are posting modest losses. The Dow is down 132.66 points or 0.3 percent at 47,822.33, the Nasdaq is down 45.77 points or 0.2 percent at 23,532.36 and the S&P 500 is down 20.64 points or 0.3 percent at 6,849.76.

The modest pullback on Wall Street may partly reflect profit taking following recent strength in the markets, which saw the Nasdaq and S&P 500 reach their best closing levels in a month last Friday.

Overall trading activity remains somewhat subdued, however, as traders look ahead to the Federal Reserve’s monetary policy decision on Wednesday.

With the Fed widely expected to lower interest rates by another quarter point, traders are likely to pay close attention to the accompanying statement for clues about the likelihood of further rate cuts next year.

CME Group’s FedWatch Tool is currently indicating an 89.6 percent chance the Fed will lower rates by a quarter point on Wednesday but a 70.3 percent chance the central bank will leave rates unchanged in January.

“Markets may not rally if we get a 25 basis-point cut, given how investors are already expecting it to happen,” said Dan Coatsworth, head of markets at AJ Bell.

He added, “Instead, markets are only likely to move in a large way up or down if we don’t get a cut or if the cut is much bigger than expected.”

Reflecting the lackluster performance by the broader markets, most of the major sectors are showing only modest moves on the day.

Networking stocks have shown a strong move to the upside, however, with the NYSE Arca Networking Index climbing by 1.7 percent.

Notable strength is also visible among software stocks, while healthcare, housing and retail stocks have moved to the downside.

In overseas trading, stock markets across the Asia-Pacific region turned in a mixed performance on Monday. Japan’s Nikkei 225 Index crept up by 0.2 percent and China’s Shanghai Composite Index rose by 0.5 percent, while Hong Kong’s Hang Seng Index slumped by 1.2 percent.

Meanwhile, the major European markets have all moved to the downside on the day. While the German DAX Index is just below the unchanged line, the French CAC 40 Index and the U.K.’s FTSE 100 Index are both down by 0.3 percent.

In the bond market, treasuries are extending the downward move seen over the two previous sessions. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, is up by 4.3 basis points at 4.182 percent.

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