U.S. Stocks Climb Well Off Worst Levels But Remain Mostly Lower

(RTTNews) - After moving sharply lower early in the session, stocks have regained some ground over the course of the trading day on Monday. The major averages have climbed well off their worst levels of the day but remain in negative territory.

Currently, the Nasdaq is down 41.19 points or 0.3 percent at 15,587.77 after falling as much as 1.0 percent in early trading. The S&P 500 is down 15.60 points or 0.3 percent at 4,943.01, while the narrower Dow remains more firmly in the red, down 274.42 points or 0.7 percent at 38,380.00.

The early weakness on Wall Street came as some traders looked to cash in on the rally seen to close out the previous week amid fading optimism about the likelihood the Federal Reserve will cut interest rates in March.

Fed Chair Jerome Powell reiterated the central bank is unlikely to cut interest rates next month during an interview with "60 Minutes" on Sunday.

Powell suggested the strength of the U.S. economy even amidst elevated rates will allow the Fed to proceed carefully.

"With the economy strong like that, we feel like we can approach the question of when to begin to reduce interest rates carefully," Powell said.

"We want to see more evidence that inflation is moving sustainably down to 2 percent," He added. "Our confidence is rising. We just want some more confidence before we take that very important step of beginning to cut interest rates."

Following last week's Fed meeting and Powell's subsequent comments, the chances of a March rate cut have fallen to just a 16.5 percent, according to CME Group's FedWatch Tool.

Stocks fell to their lows of the session as the Institute for Supply Management released a report showing U.S. service sector growth accelerated by more than expected in the month of January.

The ISM said its services PMI climbed to 53.4 in January from a downwardly revised 50.5 in December, with a reading above 50 indicating growth in the sector. Economists had expected the index to rise to 52.0 from the 50.6 originally reported for the previous month.

The report also said the prices index surged to 64.0 in January from 56.7 in December, indicating a substantial acceleration in the pace of price growth.

"The latest data releases, including both last Friday's solid jobs report and today's stronger-than-expected ISM Services PMI, will make the Fed more comfortable waiting a bit longer to start cutting short-term interest rates," said Bill Adams, Chief Economist for Comerica Bank.

Selling pressure has waned over the course of the session, however, as traders once again saw the pullback as a buying opportunity about general optimism about the outlook for the markets.

Sector News

Despite the recovery attempt by the broader markets, gold stocks continue to see significant weakness on the day, dragging the NYSE Arca Gold Bugs Index down by 2.0 percent.

The weakness in the gold sector comes amid a continued decrease by the price of the precious metal, with gold for April delivery falling $10.70 to $2,043 an ounce.

Considerable weakness also remains visible among airline stocks, as reflected by the 2.0 percent slump by the NYSE Arca Airline Index.

Interest rate-sensitive telecom and commercial real estate stocks are also seeing notable weakness, moving lower along with steel, brokerage and utilities stocks.

On the other hand, pharmaceutical stocks are turning in a strong performance on the day, resulting in a 1.5 percent gain by the NYSE Arca Pharmaceutical Index.

Computer hardware and semiconductor stocks have also moved to the upside, contributing to the rebound by the tech-heavy Nasdaq.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region turned in a mixed performance during trading on Monday. Japan's Nikkei 225 Index rose by 0.5 percent, while China's Shanghai Composite Index slumped by 1.0 percent.

Meanwhile, the major European markets saw modest weakness on the day. While the German DAX Index edged down by 0.1 percent, the French CAC 40 Index and the U.K.'s FTSE 100 Index both closed just below the unchanged line.

In the bond market, treasuries have moved sharply lower, extending the sell-off seen last Friday. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, is up by 11.5 basis points at 4.148 percent.