News Column

Profit Taking Contributes To Early Weakness On Wall Street - US Commentary

July 7, 2014

WASHINGTON (Alliance News) - Stocks have moved moderately lower in early trading on Monday, giving back some ground after turning in a strong performance last week. The major averages have all moved to the downside, although selling pressure has remained somewhat subdued.

The major averages have moved roughly sideways in recent trading, stuck in negative territory. The Dow is down 63.90 points or 0.4% at 17,004.36, the Nasdaq is down 13.65 points or 0.3% at 4,472.28 and the S&P 500 is down 6.37 points or 0.3% at 1,979.07.

The early weakness on Wall Street is partly due to profit taking, with some traders cashing in on the recent strength in the markets.

Last week's gains lifted the Dow and the S&P 500 to new record highs, while the Nasdaq reached its best levels since 2000.

Worries about the outlook for interest rates are also weighing on the markets following last Thursday's much better than expected jobs data.

Nonetheless, traders seem somewhat reluctant to make any significant moves amid the absence of any major US economic reports on the day.

The economic calendar remains sparse throughout the week, although traders are likely to keep an eye on several speeches by Federal Reserve officials as well as the minute of the latest Fed meeting.

"These speeches are important because the Fed is going to have to do a better job of explaining to markets the math in their forecasts because they are falling further behind the reality of the data," said Peter Boockvar, chief market analyst at the Lindsey Group.

He added, "Janet Yellen's uber dovishness is of course well entrenched in the psyche of Wall Street, but what happens to her standing in the eyes of the markets if she doesn't pivot when the facts change?"

Additionally, aluminum giant Alcoa (AA) is scheduled to release its second quarter results after the close of trading of Tuesday.

The release of results from Alcoa is typically seen as the unofficial start of earnings season, although the reporting season won't really start to pick up until next week.

Gold stocks are seeing considerable weakness, with the NYSE Arca Gold Bugs Index falling by 1.6%. The losses by gold stocks come amid a decrease by the price of the precious metal.

Airline, brokerage, and oil service stocks are also seeing early weakness, while most of the other major sectors have shown more modest moves to the downside.

In overseas trading, stock markets across the Asia-Pacific region turned in a mixed performance during trading on Monday. Japan'sNikkei 225 Index fell by 0.4%, while Singapore's Straits Times Index advanced by 0.6%.

Meanwhile, the major European markets have all moved to the downside on the day. While the French CAC 40 Index has fallen by 1%, the German DAX Index and the UK'sFTSE 100 Index are down by 0.6% and 0.5%, respectively.

In the bond market, treasuries are seeing modest strength after pulling back sharply over the past few sessions. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, is down by 2 basis points at 2.628%.

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Source: Alliance News

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