Stocks Continue To Show A Lack Of Direction In Mid-Day Trading - U.S. Commentary

(RTTNews) - With traders taking a breather following the upward move seen over the past few sessions, stocks continue to turn in a lackluster performance in mid-day trading on Friday. The major averages are showing only modest moves after ending Thursday's trading sharply higher.

Currently, the major averages remain on opposite sides of the unchanged line. While the Nasdaq is up 7.30 points or 0.2 percent at 4,757.70, the Dow is down 56.96 points or 0.3 percent at 17,757.02 and the S&P 500 is down 4.57 points or 0.2 percent at 2,058.58.

The choppy trading on Wall Street is partly due to uncertainty about the near-term outlook for the markets following the volatility seen thus far in the New Year.

Buying interest has recently been generated by optimism about additional stimulus from the European Central Bank, although questions remain about the effectiveness of the bank's expanded asset purchase program.

On Thursday, ECB President Mario Draghi said the bank will purchase 60 billion euros per month worth of securities, including investment grade sovereign bonds, beginning in March.

The expanded asset purchase program is currently scheduled to last until September of 2016, although Draghi said purchases would continue until there is a sustained improvement in inflation. However, Peter Boockvar, managing director at the Lindsey Group, noted that commodities did not participate in the rally on Thursday despite being the implicit target of ECB quantitative easing.

"Higher commodity prices, which will happen, will certainly solve Draghi's 'price stability' problems," Boockvar said. "Then we'll definitely test the central bank thesis that higher inflation leads to growth rather than being a consequence of it."

Traders are also digesting the latest U.S. economic data, including a report from the National Association of Realtors showing that existing home sales rebounded roughly in line with estimates in December.

NAR said existing home sales rose 2.4 percent to a seasonally adjusted annual rate of 5.04 million in December after tumbling 6.3 percent to a downwardly revised 4.92 million in November.

Economists had expected existing home sales to climb to an annual rate of 5.05 million from the 4.93 million originally reported for the previous month.

A separate report from the Conference Board showed that its index of leading U.S. economic indicators rose by slightly more than expected in December.

Sector News

Many of the major sectors are showing only modest moves on the day, contributing to the lackluster performance being turned in by the broader markets.

Steel stocks are seeing substantial weakness, however, with the NYSE Arca Steel Index tumbling by 3.6 percent. Cliffs Natural Resources (CLF), ArcelorMittal (MT), and U.S. Steel (X) are turning in some of the sector's worst performances.

Considerable weakness also remains visible among gold stocks, as reflected by the 2.7 percent loss being posted by the NYSE Arca Gold Bugs Index. The weakness in the sector comes as gold for February delivery is sliding $10.60 to $1,290.10 an ounce.

On the other hand, networking stocks have shown a strong move to the upside on the day, driving the NYSE Arca Networking Index up by 2.3 percent. Infinera (INFN) has helped to lead the sector higher, surging up by 18.7 percent after reporting strong fourth quarter earnings.

Natural gas and internet stocks are also seeing strength in mid-day trading, although buying interest has remained somewhat subdued.

Other Markets

In overseas trading, most stock markets across the Asia-Pacific region moved notably higher during trading on Friday. Japan's Nikkei 225 Index advanced by 1.1 percent, while Hong Kong's Hang Seng Index shot up by 1.3 percent.

The major European markets also moved to the upside on the day. While the U.K.'s FTSE 100 Index rose by 0.5 percent, the French CAC 40 Index and the German DAX Index jumped by 1.9 percent and 2.1 percent, respectively.

In the bond market, treasuries are moving significantly higher, offsetting the weakness seen in the two previous sessions. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, is down by 7.6 basis points at 1.82 percent.