Stocks Finish Lackluster Session Nearly Flat - U.S. Commentary

(RTTNews) - After ending the previous session modestly higher, stocks showed a lack of direction over the course of the trading day on Wednesday. Despite the lackluster performance, the tech-heavy Nasdaq reached another new record closing high.

The major averages eventually ended the day on opposite sides of the unchanged line. While the Nasdaq crept up 8.02 points or 0.2 percent to 5,283.93, the Dow dipped 11.98 points or 0.1 percent to 18,526.14 and the S&P 500 edged down 0.33 points or less than a tenth of a percent to 2,186.15.

The choppy trading on Wall Street came as traders largely shrugged off the Federal Reserve's Beige Book, which said economic activity continued to expand at a modest pace from July through late August.

The Fed said most districts reported a "modest" or "moderate" pace of overall growth, with contacts across the twelve districts generally expecting moderate economic growth in the coming months.

The report also said labor market conditions remained tight in most districts, while price increases remained slight overall.

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 late 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 have been 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

Many of the major sectors ended the day showing only modest moves, contributing to the lackluster close by the broader markets.

Airline stocks saw substantial strength, however, with the NYSE Arca Airline Index surging up by 2.7 percent. With the gain, the index reached its best closing level in over four months.

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

Significant strength was also visible among electronic storage stocks, as reflected by the 2.5 percent jump by the NYSE Arca Disk Drive Index. The gain lifted the index to a two-month closing high.

Western Digital (WDC) led the storage sector higher, soaring by 12.1 percent after the hard drive maker raised its first quarter earnings and sales guidance due in part to its recent acquisition of SanDisk.

Biotechnology and natural gas stocks also saw notable strength on the day, while gold stocks gave back some ground along with the price of the precious metal.

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 showed a lack of direction throughout the session before closing roughly flat. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, edged down by less than a basis point to 1.541 percent.

Looking Ahead

Trading on Thursday may be impacted by reaction to a report on weekly jobless claims, which are expected to inch up to 264,000 in the week ended September 3rd.