Stocks Move Back To The Downside After Last Week's Rebound - U.S. Commentary

(RTTNews) - Stocks moved mostly lower over the course of the trading day on Monday, giving back some ground following the recovery seen last week. The markets rebounded after moving lower in early trading but moved back to the downside as the day progressed.

The major averages ended the session firmly in negative territory but off their worst levels of the day. The Dow dropped 114.98 points or 0.7 percent to 16,528.03, the Nasdaq slid 51.82 points or 1.1 percent to 4,776.51 and the S&P 500 fell 16.69 points or 0.8 percent to 1,972.18.

The weakness on Wall Street partly reflected renewed concerns about the Chinese economy after a report from the Financial Times said the government has decided to abandon attempts to boost the stock market through large-scale share purchases.

Senior regulatory officials told the Financial Times China's leaders feel they mishandled their efforts to rescue the stock market.

The Chinese government resumed large-scale stock buying late in the trading day last Thursday to help the Shanghai Composite Index close sharply higher, but officials said the government will refrain from further large-scale buying of equities.

On the U.S. economic front, MNI Indicators released a report showing that business activity in the Chicago area unexpectedly grew at a slower rate in the month of August.

MNI Indicators said its Chicago business barometer dipped to 54.4 in August from 54.7 in July. While a reading above 50 indicates growth, economists had expected the index to inch up to 54.9.

Trading activity was somewhat subdued, however , with traders looking ahead to the release of several key economic reports in the coming days.

The monthly jobs report due on Friday may be the highlight of the week, but traders are also likely to keep an eye on reports on manufacturing and service sector activity, construction spending, and international trade as well as the Federal Reserve's Beige Book.

Sector News

Biotechnology stocks moved sharply lower over the course of the trading day, dragging the NYSE Arca Biotechnology Index down by 2.8 percent. The pullback by the index came after it rose sharply over the four previous sessions.

Novavax (NVAX), United Therapeutics (UTHR) and Alnylam Pharmaceuticals (ALNY) turned in some of the biotech sector's worst performances.

Significant weakness was also visible among commercial real estate stocks, as reflected by the 2.3 percent loss posted by the Morgan Stanley REIT Index. Aimco (AIV) and Brandywine Realty Trust (BDN) posted notable losses.

Health care, gold, and utilities stocks also came under pressure on the day, moving lower along with most of the other major sectors.

Meanwhile, energy stocks bucked the downtrend amid a sharp increase by the price of crude oil. Crude for October delivery jumped $3.98 to $49.20 a barrel, reaching its highest levels in over a month.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved mostly lower during trading on Monday. Japan's Nikkei 225 Index tumbled by 1.3 percent, while China's Shanghai Composite Index fell by 0.8 percent.

The major European markets also moved to the downside on the day. While the German DAX Index fell by 0.4 percent, the French CAC 40 Index dropped by 0.5 percent. The markets in the U.K. were closed for a holiday.

In the bond market, treasuries turned lower over the course of the trading day after seeing early strength. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, rose 1.4 basis points to 2.2 percent after hitting a low of 2.137 percent.

Looking Ahead

Trading on Tuesday may be impacted by reaction to reports on national manufacturing activity and construction spending.