Stocks Close In The Red After Seeing Early Strength - U.S. Commentary

(RTTNews) - After failing to sustain an early upward move, stocks turned lower over the course of the trading day on Monday. The major averages pulled back well off their early highs, eventually ending the session in negative territory.

Going into the close, the major averages saw some further downside, finishing the day near their lows for the session. The Dow slid 80.61 points or 0.5 percent to 17,977.04, the Nasdaq edged down 7.73 points or 0.2 percent to 4,988.25 and the S&P 500 fell 9.63 points or 0.5 percent to 2,092.43.

The downturn on the day may partly have reflected profit taking following the strength that was seen in the markets last week.

At its high for the session, the tech-heavy Nasdaq was back above 5,000, moving back toward the fifteen-year highs set last month.

Concerns about the impending earnings season may also have weighed on the markets, with analysts expecting the results to be generally weak.

While the release of first quarter results from Alcoa (AA) last week was seen as the unofficial start of earnings season, the reports will start to pick up over the next few days

JP Morgan (JPM), Intel (INTC), Bank of America (BAC), Wells Fargo (WFC), Netflix (NFLX), Goldman Sachs (GS), American Express (AXP), and General Electric (GE) are among the big-name companies due to release their results this week.

Several key economic reports are also scheduled to be released in the coming days, with traders likely to keep a close eye on reports on retail sales, industrial production, housing starts, and producer and consumer price inflation.

Traders are likely to focus on how the data will impact the outlook for interest rates amid lingering uncertainty about the timing of the first rate hike.

The minutes of the latest Federal Reserve meeting released last Wednesday showed that some officials are calling for a rate hike as soon as June even as others suggested waiting until next year.

Sector News

Railroad stocks showed a significant move to the downside as the day progressed, dragging the Dow Jones Railroads Index down by 2.1 percent. The index partly offset a recent upward move but remained above the five-month closing low set last Monday.

Union Pacific (UNP), CSX Corp. (CSX), and Providence & Worcester (PWX) turned in some of the railroad sector's worst performances.

Considerable weakness also emerged among energy stocks, which moved lower on the day even as the price of crude for May delivery climbed $0.27 to $51.91 a barrel.

Reflecting the weakness in the energy sector, the Philadelphia Oil Service Index and the NYSE Arca Oil & Gas Index dropped by 1.3 percent and 1.2 percent, respectively.

Utilities, trucking, and pharmaceutical stocks also came under pressure on the day, while some strength remained visible among banking stocks.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved mostly higher on Monday, although Japan's Nikkei 225 Index closed nearly flat. Hong Kong's Hang Seng Index surged up by 2.7 percent, while China's Shanghai Composite Index jumped by 2.2 percent.

Meanwhile, the major European markets turned in a mixed performance on the day. While the French CAC 40 Index rose by 0.3 percent, the German DAX Index and the U.K.'s FTSE 100 Index fell by 0.3 percent and 0.4 percent, respectively.

In the bond market, treasuries showed a lack of direction for much of the session before closing modestly higher. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, edged down by 1.2 basis points to 1.939 percent.

Looking Ahead

Trading on Tuesday is likely to be impacted by reaction to closely watched reports on retail sales and producer price inflation.

On the earnings front, JP Morgan, Wells Fargo and Johnson & Johnson (JNJ) are likely to be in focus after releasing their quarterly results before the start of trading.