Stocks Close Nearly Flat After Recovering From Early Weakness - U.S. Commentary

(RTTNews) - Stocks showed a significant recovery over the course of the trading day on Monday after coming under pressure in early trading. The markets eventually ended the session roughly flat following the mixed performance that was seen last week.

The major averages finished the day on opposite sides of the unchanged line. While the Nasdaq edged down 4.65 points or 0.1 percent to 4,444.91, the Dow crept up 22.02 points or 0.1 percent to 16,982.59 and the S&P 500 inched up 0.57 points or less than a tenth of a percent to 1,978.91.

The early weakness on Wall Street partly reflected trepidation ahead of some potentially market-moving events later in the week.

The Federal Reserve's monetary policy announcement on Wednesday and the release of the Labor Department's monthly jobs report on Friday are likely to be two major focal points for the markets.

However, traders are also likely to keep an eye on reports on second quarter GDP, manufacturing activity, consumer confidence, and personal income and spending.

Negative sentiment was also generated by the release of a report from the National Association of Realtors showing an unexpected drop in pending home sales in the month of June.

NAR said its pending home sales index dropped by 1.1 percent to 102.7 in June after surging up by 6 percent to 103.8 in May. The decrease came as a surprise to economists, who had expected pending home sales to increase by another 0.5 percent.

A pending home sale is one in which a contract was signed but not yet closed. Normally, it takes four to six weeks to close a contracted sale.

Nonetheless, stocks climbed well off their worst levels of the day over the course of the session, potentially reflecting a positive reaction to news on the merger-and-acquisition front.

Shares of Family Dollar (FDO) moved sharply higher on the day after the discount retailer agreed to be acquired by rival Dollar Tree (DLTR) in a deal valued at approximately $9.2 billion.

Real estate website operator Trulia (TRLA) also posted a standout gain after agreeing to be acquired by rival Zillow (Z) for $3.5 billion in stock.

Sector News

Despite the recovery by the broader markets, significant weakness remained visible among housing stocks. The Philadelphia Housing Sector Index fell 1.4 percent to a two-month closing low on the heels of the disappointing pending home sales data.

Ryland Group (RYL), Masco (MAS), and Hovnanian (HOV) turned in some of the housing sector's worst performances on the day.

Transportation stocks also saw significant weakness on the day, dragging the Dow Jones Transportation Average down by 1.1 percent. With the loss, the average pulled back further off the record closing high it set last Wednesday.

Meanwhile, utilities stocks showed a strong move to the upside over the course of the session, resulting in a 1.3 percent gain by the Dow Jones Utilities Average. American Electric Power (AEP) and PSEG (PEG) posted notable gains.

Most of the other major sectors ended the day showing only modest moves, contributing to the roughly flat close by the broader markets.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region ended Monday's trading mixed. Japan's Nikki 225 Index rose by 0.5 percent, while Australia's All Ordinaries Index edged down by 0.1 percent. The markets in Singapore, Malaysia, and Indonesia were closed for public holidays.

The major European markets also turned in a mixed performance on the day. While the French CAC 40 Index advanced by 0.3 percent, the U.K.'s FTSE 100 Index dipped by 0.1 percent and the German DAX Index fell by 0.5 percent.

In the bond market, treasuries ended the session modestly lower after initially showing a lack of direction. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, rose by 2.2 basis points to 2.491 percent.

Looking Ahead

While activity may be somewhat subdued as the Fed's two-day meeting gets underway, trading on Tuesday could be impacted by the release of reports on home prices and consumer confidence.

On the earnings front, Aetna (AET), BP (BP), Merck (MRK), Pfizer (PFE), and UPS (UPS) are among the companies due to report their quarterly results before the start of trading on Tuesday.