Tech Stock Weakness Continues To Weigh On Wall Street – U.S. Commentary

After moving lower early in the session, stocks have seen some further downside over the course of the trading day on Monday. The tech-heavy Nasdaq has shown a particularly steep drop, underperforming the other major sectors.

Currently, the major averages are just off their lows of the session. The Dow is down 52.95 points or 0.2 percent at 25,398.11, the Nasdaq is down 76.79 points or 1 percent at 7,660.63 and the S&P 500 is down 7.84 points or 0.3 percent at 2,810.98.

The weakness on Wall Street comes as tech stocks are seeing further downside following last week’s pullback, with Twitter (TWTR), Netflix (NFLX) and Facebook (FB) all moving sharply lower.

On the other hand, shares of Caterpillar (CAT) have moved to the upside after the heavy equipment maker reported better than expected second quarter earnings and raised its full-year guidance.

Caterpillar also said it expects recently imposed tariffs to impact operating profit in the second half by up to $200 million but said it intends to largely offset the impacts with price increases.

In U.S. economic news, the National Association of Realtors released a report showing a much bigger than expected rebound in pending home sales in the month of June.

NAR said its pending home sales index climbed by 0.9 percent to 106.9 in June after falling by 0.5 percent to 105.9 in May. Economists had expected pending home sales to inch up by 0.1 percent.

Despite the much bigger than expected increase, pending home sales in June were down by 2.5 percent compared to the same month a year ago, reflecting the sixth straight year-over-year decrease.

A pending home sale is one in which a contract was signed but not yet closed. Normally, it takes four to six weeks to close a contracted sale.

Meanwhile, overall trading activity is somewhat subdued as traders look ahead to the Federal Reserve’s monetary policy announcement on Wednesday.

The Fed is widely expected to leave interest rates unchanged, but traders are likely to keep a close eye on the accompanying statement for clues about the outlook for rates.

Sector News

Biotechnology stocks continue to turn in some of the market’s worst performances on the day, extending the steep drop seen in the previous session. The NYSE Arca Biotechnology Index is down by 1.3 percent after slumping by 1.9 percent last Friday.

Considerable weakness has also emerged among semiconductor stocks, as reflected by the 1.1 percent drop by the Philadelphia Semiconductor Index.

On the other hand, energy stocks have shown a strong move to the upside amid a sharp increase by the price of crude oil. Crude for September delivery is jumping $1.40 to $70.09 a barrel due to concerns about looming sanctions on Iran.

Reflecting the strength in the energy sector, the Philadelphia Oil Service Index is up by 1.9 percent, the NYSE Arca Natural Gas Index is up by 1.4 percent and the NYSE Arca Oil Index is up by 1.1 percent.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved mostly lower during trading on Monday. Japan’s Nikkei 225 Index slid by 0.7 percent, while Hong Kong’s Hang Seng Index fell by 0.3 percent.

The major European markets also moved to the downside on the day. While the U.K.’s FTSE 100 Index closed just below the unchanged line, the French CAC 40 Index and the German DAX Index dropped by 0.4 percent and 0.5 percent, respectively.

In the bond market, treasuries have pulled back after ending the previous session modestly higher. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, is up by 1.5 basis points at 2.975 percent.

by RTTNews Staff Writer

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