Following the volatility seen to close out the previous week, stocks turned in a relatively lackluster performance during trading on Monday. The major averages spent the day bouncing back and forth across the unchanged line.
The major averages eventually ended the session slightly higher. While the S&P 500 edged up 3.21 points or 0.1 percent to 4,453.53, the Dow inched up 6.06 points or less than a tenth of a percent to 34,624.30 and the Nasdaq crept up 1.90 points or less than a tenth of a percent to 13,710.24.
The choppy trading on Wall Street came as traders seemed reluctant to make significant moves ahead of the Federal Reserve’s monetary policy announcement on Wednesday.
The Fed is widely expected to leave interest rates unchanged, but traders will pay close attention to the accompanying statement and the central bank’s projections for clues about the outlook for rates.
While CME Group’s FedWatch Tool is currently indicating a 99.0 percent chance the Fed will leave rates unchanged this week, the outlook for the November meeting is somewhat more mixed.
The FedWatch Tool is indicating a 69.0 percent chance rates will remain unchanged in November but a 30.7 percent chance of another quarter point rate hike.
“How the Fed delivers the pause is crucial for November and December rate expectations, but whether it’s presented with a dovish or hawkish tilt is what matters most for financial markets,” said Quincy Krosby, Chief Global Strategist for LPL Financial. “The Fed, and Fed Chair Powell particularly, will emphasize that they remain data dependent.”
She added, “Financial markets are even more keenly data dependent, and the wrapping of the pause, with a dovish or hawkish angle, is key for the market’s direction.”
On the U.S. economic front, the National Association of Home Builders released a report showing homebuilder confidence in the U.S. has unexpectedly deteriorated in the month of September.
The report said the NAHB/Wells Fargo Housing Market Index slumped to 45 in September after tumbling to 50 in August. Economists had expected the index to come in unchanged.
The housing market index dropped below the key breakeven measure of 50 for the first time in five months, as persistently high mortgage rates above 7 percent continue to erode builder confidence.
Sector News
Reflecting the lackluster close by the broader markets, most of the major sectors ended the day showing only modest moves.
Airline stocks showed a significant move to the downside, however, with the NYSE Arca Airline Index falling by 1.8 percent to its lowest closing level in well over four months.
Considerable weakness was also visible among biotechnology stocks, as reflected by the 1.4 percent drop by the NYSE Arca Biotechnology Index.
Commercial real estate stocks also moved lower on the day, while oil stocks saw some strength amid a continued increase by the price of crude oil.
Other Markets
In overseas trading, stock markets across the Asia-Pacific region moved mostly lower on Monday, with the Japanese markets closed for a holiday. Hong Kong’s Hang Seng Index tumbled by 1.4 percent and South Korea’s Kospi slumped by 1.0 percent, while China’s Shanghai Composite Index bucked the downtrend and rose by 0.3 percent.
The major European markets also moved to the downside on the day. While the French CAC 40 Index plunged by 1.4 percent, the German DAX Index dove by 1.1 percent and the U.K.’s FTSE 100 Index fell by 0.7 percent.
In the bond market, treasuries climbed back near the unchanged line after seeing early weakness. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, edged down by less than a basis point to 4.319 percent after reaching a nearly one-month intraday high of 4.359 percent.
Looking Ahead
Trading activity is likely to remain somewhat subdued on Tuesday, although a report on housing starts may attract some attention.
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