Rate Uncertainty Leads To Modest Weakness On Wall Street - U.S. Commentary

(RTTNews) - Following the upward move seen over the course of the previous session, treasuries gave back some ground during trading on Tuesday. Selling pressure was relatively subdued, however, limiting the downside for the markets.

The major averages climbed well off their worst levels going into the close but still ended the day in the red. The Dow slipped 48.69 points or 0.3 percent to 18,454.30, the Nasdaq edged down 9.34 points or 0.2 percent to 5,222.99 and the S&P 500 dipped 4.26 points or 0.2 percent to 2,176.12.

Uncertainty about the outlook for interest rates weighed on the markets ahead of the release of the closely watched monthly jobs report on Friday.

The employment report for August could have a significant impact on expectations for the next Federal Reserve meeting in September.

The report is expected to show an increase of about 175,000 jobs in August after a jump of 255,000 jobs in July. The unemployment rate is expected to edge down to 4.8 percent from 4.9 percent.

In a highly anticipated speech last Friday, Fed Chair Janet Yellen said she believes the case for raising interest rates has strengthened in recent months.

The Conference Board released a report this morning showing a significant improvement in consumer confidence in the month of August.

The consumer confidence index jumped to 101.1 in August from a downwardly revised 96.7 in July, reaching its highest level since last September.

Economists had expected the index to come in unchanged compared to the 97.3 originally reported for the previous month.

A separate report released by Standard & Poor's showed an unexpected slowdown in the pace of home price growth in major metropolitan areas in the month of June.

Sector News

Gold stocks showed a substantial move to the downside on the day, dragging the NYSE Arca Gold Bugs Index down by 5.6 percent. With the steep drop, the index tumbled to its lowest closing level in over two months.

The weakness among gold stocks came amid a decrease by the price of the precious metal, with gold for December delivery sliding $10.60 to a two-month closing low of $1,316.50 an ounce.

Significant weakness was also visible among steel stocks, as reflected by the 2.3 percent loss posted by the NYSE Arca Steel Index. The pullback on the day more than offset yesterday's 2.2 percent jump.

Oil service stocks also came under pressure amid a decrease by the price of crude oil, while utilities stocks saw notable weakness due to interest rate concerns.

On the other hand, financial stocks showed a strong upward move as the day progressed, driving the NYSE Arca Broker/Dealer Index and the Dow Jones Banks Index up by 1.6 percent and 1.4 percent, respectively.

Airline stocks also saw considerable strength, with the NYSE Arca Airline Index climbing by 1.5 percent. United Continental (UAL) led the sector higher after announcing the appointment of former American Airlines (AAL) executive Scott Kirby as its president.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region turned in yet another mixed performance during trading on Tuesday. While Japan's Nikkei 225 Index edged down by 0.1 percent, Hong Kong's Hang Seng Index jumped by 0.9 percent.

The major European markets also finished the day mixed. While the U.K.'s FTSE 100 Index dipped by 0.3 percent, the French CAC 40 Index advanced by 0.8 percent and the German DAX Index surged up by 1.1 percent.

In the bond market, treasuries showed a lack of direction throughout the session before closing roughly flat. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, inched up by less than a basis point to 1.570 percent.

Looking Ahead

Reaction to reports on private sector employment, pending home sales, and Chicago-area business activity may impact trading on Wednesday.