Stocks Continue To Show A Lack Of Direction In Mid-Day Trading - U.S. Commentary

(RTTNews) - After recovering from an initial move to the downside, stocks have shown a lack of direction over the course of the trading day on Tuesday. The choppy trading comes on the heels of the notable pullback seen in the previous session.

Currently, the major averages continue to turn in a mixed performance. While the Nasdaq is up 2.64 points or 0.1 percent at 4,530.33, the Dow is down 24.72 points or 0.1 percent at 17,147.96 and the S&P 500 is down 1.78 points or 0.1 percent at 1,992.51.

The lackluster performance on Wall Street comes as traders are expressing some uncertainty about the near-term outlook for the markets.

A positive reaction to the Federal Reserve's monetary policy announcement lifted the Dow and the S&P 500 to record highs last week, but the next major catalyst for the markets is currently unknown.

The initial move to the downside was partly due to news that the U.S. Treasury Department is taking targeted action to reduce the tax benefits of corporate tax inversions.

The Treasury claimed that companies are increasingly using a technique of inversion in which a U.S. based multinational restructures so that the U.S. parent is replaced by a foreign corporation in order to avoid U.S. taxes.

Treasury Secretary Jack Lew said the action will significantly diminish the ability of inverted companies to escape U.S. taxation. Geopolitical concerns also weighed on the markets amid news that the U.S. has expanded its military campaign against the Islamic State into Syria for the first time.

A statement from U.S. Central Command said U.S. military forces and partner nations attacked the terrorists in Syria using a mix of fighters, bombers, remotely piloted aircraft and Tomahawk Land Attack Missiles.

Nonetheless, a report from HSBC and Markit Economics showing an acceleration in Chinese manufacturing activity in September may have helped limit the downside.

The report said the manufacturing purchasing managers index rose to 50.5 in September from 50.2 in August, while economists had expected the index to dip to 50.0. A reading above 50 indicates growth.

Markit released a separate report showing that the flash estimate of its index of manufacturing activity in the U.S. came in at 57.9 in September, unchanged from the previous month.

Sector News

Reflecting the lack of direction being shown by the broader markets, most of the major sectors are showing only modest moves in mid-day trading.

Gold stocks have shown a strong move to the upside, however, with the NYSE Arca Gold Bugs Index advancing by 1.4 percent. The index is regaining some ground after ending the previous session at an eight-month closing low.

The rebound by gold stocks comes amid an increase by the price of the precious metal, as gold for December delivery is climbing $5.70 to $1,223.60 an ounce.

Oil service stocks are also seeing some strength amid an increase by the price of crude oil, while weakness is visible among tobacco and defense stocks.

Other Market

In overseas trading, stock markets across the Asia-Pacific region turned in a mixed performance on Tuesday. China's Shanghai Composite Index advanced by 0.9 percent, while Hong Kong's Hang Seng Index dropped by 0.5 percent. The Japanese markets were closed for a holiday.

Meanwhile, the major European markets all showed notable moves to the downside on the day. While the French CAC 40 Index plummeted by 1.9 percent, the German DAX Index and the U.K.'s FTSE 100 Index tumbled by 1.6 percent and 1.4 percent, respectively.

In the bond market, treasuries continue to see modest strength, extending their recovery from last week's lows. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, is down 1.7 basis points at 2.549 percent.