Stocks Seeing Moderate Weakness In Morning Trading - U.S. Commentary

(RTTNews) - Stocks are seeing moderate weakness in morning trading on Wednesday, extending the pullback seen in the previous session. The major averages have all moved to the downside, further offsetting the strong gains posted last week.

Currently, the major averages are off their worst levels of the day but stuck in negative territory. The Dow is down 83.55 points or 0.5 percent at 17,757.07, the Nasdaq is down 6.12 points or 0.1 percent at 4,816.78 and the S&P 500 is down 8.63 points or 0.4 percent at 2,079.92.

Lingering concerns about the impact of Britain's vote to leave the European Union continue to weigh on the markets after contributing to the weakness seen on Tuesday.

The so-called Brexit vote has raised global growth worries, leading some traders to move their money into safe havens such as U.S. government bonds.

The strength among bonds has pushed the yields on ten-year notes and thirty-year bonds to record lows. Bond yields move opposite of their price.

The Brexit concerns have also led to a notable decline by the British pound, which has fallen to its lowest level against the U.S. dollar in over thirty years.

In U.S. economic news, the Institute for Supply Management released a report showing faster than expected growth in the U.S. service sector activity in the month of June.

The ISM said its non-manufacturing index jumped to 56.5 in June from 52.9 in May, with a reading above 50 indicating growth in the service sector. Economists had expected the index to inch up to 53.3.

With the bigger than expected increase, the non-manufacturing index rose to its highest level since reaching 56.6 last November.

Andrew Hunter, Assistant Economist at Capital Economics, said, "The rebound in the ISM index reinforces our view that the US economy remains on a firm footing."

"Following an acceleration to around 3% annualized in the second quarter, we still expect GDP growth to reach a solid 2% for 2016 as a whole," he added.

Before the start of trading, the Commerce Department released a separate report showing that the U.S. trade deficit widened by more than expected in the month of May.

The report said the trade deficit widened to $41.1 billion in May from $37.4 billion in April. Economists had expected the deficit to widen to $40.0 billion.

The wider than expected trade deficit came as the value of imports surged up by 1.6 percent, while the value of exports edged down by 0.2 percent.

Airline stocks have shown a substantial move to the downside on the day, dragging the NYSE Arca Airline Index down by 2.6 percent. United Continental (UAL) has helped to lead the sector lower after being downgraded to Neutral from Outperform at Credit Suisse

Electronic storage, energy, and steel stocks are also seeing considerable weakness, while gold stocks are once again bucking the downtrend by the broader markets.

In overseas trading, stock markets across the Asia-Pacific region moved mostly lower during trading on Wednesday. Japan's Nikkei 225 Index plunged by 1.9 percent, while Hong Kong's Hang Seng Index slumped by 1.2 percent.

The major European markets have also shown notable moves to the downside on the day. While the U.K.'s FTSE 100 Index has tumbled by 1.6 percent, the French CAC 40 Index and the German DAX Index are both down by 2.3 percent.

In the bond market, treasuries have pulled back near the unchanged line after seeing early strength. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, is up by less than a basis point 1.373 percent.