Stocks Recovering From Initial Move To The Downside - U.S. Commentary

(RTTNews) - After moving sharply lower at the start of trading on Monday, stocks have staged a notable recovery attempt over the course of the session. Renewed optimism about a potential agreement in Washington has helped to lift the markets off their worst levels.

The major averages have climbed back near the unchanged line and are currently turning in a mixed performance. While the Nasdaq is up 2.01 points or 0.1 percent at 3,793.88, the Dow is down 17.71 points or 0.1 percent at 15,219.40 and the S&P 500 is down 2.31 points or 0.1 percent at 1,700.89.

The initial weakness on Wall Street reflected concerns about the apparent lack of significant progress on a deal to reopen the government and raise the debt limit.

While signs of progress toward an agreement helped to drive stocks higher last week, the talks appeared to reach a standstill over the weekend even as the debt limit deadline looms.

President Barack Obama rejected a plan from House Republicans that would temporarily raise the debt ceiling but linked reopening the government to certain GOP policy conditions.

The focus of the negotiations now switches to the Senate, where lawmakers are said to be considering a proposal from Sen. Susan Collins, R-Maine, that would fund the government and raise the debt ceiling in exchange for changes to Obamacare.

Senate Majority Leader Harry Reid, D-Nev., said he had a "substantive" and "productive conversation" with Senate Minority Leader Mitch McConnell, R-Ky., although a McConnell spokesman noted that the talks produced "nothing new."

The markets seemed to react positively to some more optimistic comments from lawmakers, including Montana Sen. Jon Tester, D-Mont.

"I feel more hopeful now than I have since the first of October," Tester told CNBC. "I think both Harry and Mitch are talking, and I think it's going to result in something good."

"The clinker is going to be: What does the House do," he added. "Is [House Speaker John Boehner] willing to put something on the floor that probably has enough votes to pass but may not be the most popular thing in the world?"

Adding to the renewed optimism, a White House official recently indicated that Obama will meet with the Congressional Leadership from both parties at the White House at 3:00 pm ET.

Sector News

Despite the recovery attempt by the broader markets, significant weakness remains visible among housing stocks. The Philadelphia Housing Sector Index is down by 1.2 percent after ending last week with two days of strong gains.

D.R. Horton (DHI), KB Home (KBH) and Standard Pacific (SPF) are turning in some of the housing sector's worst performances.

Utilities stocks also continue to see notable weakness in mid-day trading, with the Dow Jones Utilities Average down by 1 percent.

Meanwhile, tobacco stocks have shown a strong move to the upside over the course of the session, driving the NYSE Arca Tobacco Index up by 1.2 percent. With the gain, the index has reached a two-month closing high.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved mostly lower on Monday, although the markets in Japan and Hong Kong were closed for public holidays. Australia's All Ordinaries Index dropped by 0.4 percent, while South Korea's KOSPI Index edged down by 0.2 percent.

Meanwhile, the major European markets turned in a mixed performance on the day. While the German DAX Index closed just below the unchanged line, the French CAC 40 Index inched up by 0.1 percent and the U.K.'s FTSE 100 Index rose by 0.3 percent.

The bond markets are closed for the Columbus Day holiday.