Stocks Seeing Modest Weakness Ahead Of Beige Book - U.S. Commentary

(RTTNews) - While selling pressure has remained relatively subdued, stocks have moved modestly lower over the course of the trading day on Wednesday. The Nasdaq has pulled back into negative territory after reaching a record intraday high in early trading.

Currently, the major averages remain in the red but off their worst levels of the day. The Dow is down 40.20 points or 0.2 percent at 18,497.92, the Nasdaq is down 2.45 points or 0.1 percent at 5,273.46 and the S&P 500 is down 3.76 points or 0.2 percent at 2,182.72.

Uncertainty about the outlook for interest rates may be weighing on the markets ahead of the release of the Federal Reserve's Beige Book this afternoon.

The Beige Book, a compilation of anecdotal evidence on economic conditions in the twelve Fed districts, will be used by Fed officials when they make their next policy decision later this month.

While recent data has led to expectations that the Fed will refrain from raising interest rates, San Francisco Fed President John Williams reiterated his call for gradual rate hikes in a speech in Nevada on Tuesday.

"In the context of a strong economy with good momentum, it makes sense to get back to a pace of gradual rate increases, preferably sooner rather than later," Williams said.

"Let me be clear: In arguing for an increase in interest rates, I'm not trying to stall the economic expansion," he added. "It's just the opposite: My aim is to keep it on a sound footing so it can be sustained for a long time."

Traders may also be looking ahead to the European Central Bank's latest monetary policy announcement due tomorrow morning.

The ECB is expected to leave interest rates unchanged but may announce an extension of its quantitative easing program.

Sector News

After moving sharply higher over the past few sessions, gold stocks are giving back some ground on the day. Reflecting the pullback by gold stocks, the NYSE Arca Gold Bugs Index has slumped by 2.8 percent.

The weakness in the gold sector comes as the price of gold for December is sliding $5.60 to $1,348.40 an ounce after jumping $27.30 to $1,354 on Tuesday.

Meanwhile, airline stocks continue to see substantial strength in mid-day trading, with the NYSE Arca Airline Index surging up by 2.8 percent. With the gain, the index has reached its best intraday level in over four months.

Industry giants American Airlines (AAL), United Continental (UAL), and Delta (DAL) are turning in some of the airline sector's best performances.

Considerable strength is also visible among electronic storage, natural gas, and biotechnology stocks, with Western Digital (WDC) leading the storage sector higher after raising its first quarter guidance.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region turned in a mixed performance during trading on Wednesday. Japan's Nikkei 225 Index fell by 0.4 percent, while Australia's All Ordinaries Index edged up by 0.2 percent.

Meanwhile, the major European markets all moved to the upside on the day. While the U.K.'s FTSE 100 Index rose by 0.3 percent, the French CAC 40 Index and the German DAX Index both advanced by 0.6 percent.

In the bond market, treasuries are showing a lack of direction ahead of the Fed's Beige Book. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, is unchanged at 1.543 percent.