Disappointing Economic Data Leads To Weakness On Wall Street - U.S. Commentary

(RTTNews) - With disappointing economic data weighing on sentiment, stocks moved mostly lower over the course of the trading day on Monday. The pullback on the day partly offset the strength that was seen in the markets last week.

The major averages regained some ground going into the close but still ended the day in the red. The Dow fell 91.66 points or 0.5 percent to 17,598.20, the Nasdaq dipped 12.90 points or 0.3 percent to 5,115.38 and the S&P 500 slid 5.80 points or 0.3 percent to 2,098.04.

The weakness on Wall Street was partly in reaction to a report from the Institute for Supply Management showing that activity in the U.S. manufacturing sector unexpectedly grew at a slower rate in July.

The ISM said its purchasing managers index dipped to 52.7 in July from 53.5 in June, although a reading above 50 indicates continued growth in the manufacturing sector.

The decrease came as a surprise to economist, who had expected the manufacturing index to inch up to a reading of 53.7.

Bradley J. Holcomb, chair of the ISM Manufacturing Business Survey Committee, said, "Comments from the panel reflect a combination of optimism mixed with uncertainties about international markets and the impacts of the continuing decline in oil prices."

The Commerce Department also released a separate report showing a much smaller than expected increase in construction spending in the month of June.

Traders may also have been expressing some trepidation ahead of the monthly jobs report due on Friday, which could have a significant impact on the outlook for whether the Federal Reserve will raise interest rates at its next meeting in September.

Last week, analysts highlighted the inclusion of the word "some" in the Fed's assessment that it would be appropriate to raise rates "when it has seen some further improvement in the labor market."

Sector News

Gold stocks saw substantial weakness on the day, dragging the NYSE Arca Gold Bugs Index down by 4.5 percent. With the drop, the index ended the session at a twelve-year closing low.

The weakness among gold stocks came amid a decrease by the price of the precious metal, with gold for December delivery falling $5.70 to $1,089.40 an ounce.

Significant weakness was also visible among energy stocks, which came under pressure as the price of crude oil for September delivery plunged $1.95 to $45.17 a barrel.

Reflecting the weakness in the energy sector, the NYSE Arca Natural Gas Index tumbled by 3 percent, while the Philadelphia Oil Service Index and the NYSE Arca Oil & Gas Index both fell by 1.9 percent.

Computer hardware, railroad, and steel stocks also came under considerable selling pressure, while airline stocks bucked the downtrend.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved mostly lower during trading on Monday. Japan's Nikkei 225 Index dipped by 0.2 percent, while Hong Kong's Hang Seng Index fell by 0.9 percent.

Meanwhile, the major European markets turned in a mixed performance on the day. While the U.K.'s FTSE 100 Index edged down by 0.1 percent, the French CAC 40 Index advanced by 0.8 percent and the German DAX Index surged up by 1.2 percent.

In the bond market, treasuries moved notably higher, extending the strong upward move seen last Friday. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, fell by 5.5 basis points to a two-month closing low of 2.15 percent.

Looking Ahead

A report on factory orders may attract some attention on Tuesday, with economists expecting orders to jump by 1.7 percent in June after falling by 1.0 percent in May.

On the earnings front, Aetna (AET), CVS Health (CVS), Kellogg (K), and Office Depot (ODP) are among the companies due to report their quarterly results before the start of trading on Tuesday.