Disappointing Manufacturing Data Weighs On Wall Street - U.S. Commentary

(RTTNews) - After failing to sustain an initial upward move, stocks moved mostly lower over the course of the trading session on Monday. With the pullback on the day, the markets partly offset the strength that was seen last week.

The major averages all ended the day in the red, with the tech-heavy Nasdaq posting a particularly steep loss. While the Nasdaq tumbled 50.40 points or 1.2 percent to 4,226.39, the Dow edged down 26.08 points or 0.2 percent to 16,276.69 and the S&P 500 slid 9.08 points or 0.5 percent to 1,857.44.

The downturn by the markets was partly due to the release of a report from Markit Economics showing that its reading on U.S. manufacturing activity fell by more than expected in March.

Markit said the flash estimate of its manufacturing purchasing managers' index for March came in at 55.5. While a reading above 50 indicates growth, the index is down from 57.1 in February and below economist estimates of 56.5.

Reports from survey respondents cited improving economic fundamentals and, to a lesser degree, an on-going catch-up effect following weather disruptions earlier in the year, Markit said.

Peter Boockvar, chief market analyst at the Lindsey Group, "We still get more regional surveys in the week ahead before the national ISM comes out next week, which will be more of a focus for markets due to its history, much more so than today's figure."

Markit and HSBC released a separate report earlier in the day showing that the Chinese manufacturing sector fell deeper into contraction territory in March.

The manufacturing purchasing managers' index for China came in at a seasonally adjusted 48.1, representing an eight-month low. The headline number was down from 48.5 in February and shy of forecasts for 48.7.

While the data points to weakness in the Chinese manufacturing sector, the report generated some optimism that the Bank of China will take policy steps to boost the economy.

Markit also released a report showing that the European private sector continued to expand in March. The composite purchasing managers' index dipped to 53.2 in March from 53.3 in February but remained above 50.

Sector News

Gold stocks showed a substantial move to the downside on the day, dragging the NYSE Arca Gold Bugs Index down by 4 percent. With the loss, the index fell to its lowest closing level in well over a month.

The weakness among gold stocks came amid a sharp drop by the price of the precious metal, with gold for April delivery tumbling $24.80 to $1,311.20 an ounce.

Considerable weakness was also visible among biotechnology stocks, as reflected by the 2.5 percent loss posted by the NYSE Arca Biotechnology Index. The index added the 3.9 percent loss posted last Friday, hitting a monthly closing low.

Networking and computer hardware stocks also saw significant weakness on the day, contributing to the steep drop by the tech-heavy Nasdaq.

Healthcare, oil service, and retail stocks also showed notable moves to the downside, while most of the other major sectors ended the day showing only modest moves.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved mostly higher during trading on Monday. Japan's Nikkei 225 Index jumped by 1.8 percent, while Hong Kong's Hang Seng Index surged up by 1.9 percent.

Meanwhile, the major European markets moved to the downside on the day. While the U.K.'s FTSE 100 Index dropped by 0.6 percent, the French CAC 40 Index and the German DAX Index fell by 1.4 percent and 1.7 percent, respectively.

In the bond market, treasuries moved modestly higher over the course of the session after seeing early weakness. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, dipped by 1.7 basis points to 2.733 percent after reaching a high of 2.777 percent.

Looking Ahead

Housing data may attract attention on Tuesday, with traders likely to keep an eye on reports on home prices and new home sales. Trading could also be impacted by a report consumer confidence.