Stocks Show Significant Rebound After Seeing Early Weakness - U.S. Commentary

(RTTNews) - Stocks have shown a significant turnaround over the course of the trading day on Monday after coming under pressure at the open. The rebound on the day comes as traders digest a mixed batch of U.S. economic data.

Currently, the major averages are hovering in positive territory. The Dow is up 43.83 points or 0.3 percent at 17,521.23, the Nasdaq is up 19.10 points or 0.4 percent at 5,067.34 and the S&P 500 is up 5.50 points or 0.3 percent at 2,097.04.

The initial weakness on Wall Street was partly due to the release of a disappointing report from the New York Federal Reserve on regional manufacturing activity.

The New York Fed said its general business conditions index tumbled to a negative 14.9 in August from a positive 3.9 in July, with a negative reading indicating a contraction in manufacturing activity.

The sharp drop came as a surprise to economists, who had expected the index to climb to a positive reading of 4.8.

With the unexpected decrease, the general business conditions index fell to its lowest level since hitting a negative 19.4 in April of 2009.

Selling pressure waned not long after the open, however, and stocks rebounded amid the release of a separate report from the National Association of Home Builders showing a modest uptick in homebuilder confidence.

The report said the NAHB/Wells Fargo Housing Market Index inched up to 61 in August from 60 in July, in line with economist estimates.

With the modest uptick, the housing market index reached its highest level since hitting a matching reading in November of 2005.

The big swings by the markets may be partly due to light trading, with many traders away from their desks to take advantage of the waning summer.

Traders are also looking ahead to the release of the minutes of the Federal Reserve's latest monetary policy meeting on Wednesday.

The minutes are likely to be closely analyzed for hints regarding whether the Fed will begin raising interest rates at its next meeting in September.

Sector News

Gold stocks have shown a substantial move to the upside on the day, driving the NYSE Arca Gold Bugs Index up by 3.6 percent. The gain by the index comes after it closed lower in the two previous sessions.

The rally by gold stocks comes amid an increase by the price of the precious metal, with gold for December delivery climbing $5.10 to $1,117.80 an ounce.

Significant strength has also emerged among telecom stocks, as reflected by the 1.6 percent gain being posted by the NYSE Arca North American Telecom Index. Sprint (S) is leading the sector higher, jumping by 12.7 percent.

Airline stocks are also turning in a strong performance in mid-day trading, resulting in a 1.4 percent gain by the NYSE Arca Airline Index.

Housing, biotechnology, and utilities stocks have also moved higher on the day, while weakness remains visible among oil service and brokerage stocks.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region turned in a mixed performance during trading on Monday. Japan's Nikkei 225 Index rose by 0.5 percent, while Hong Kong's Hang Seng Index fell by 0.7 percent.

The major European markets also finished the day mixed. While the French CAC 40 Index advanced by 0.6 percent, the U.K.'s FTSE 100 Index closed just below the unchanged line and the German DAX Index fell by 0.4 percent.

In the bond market, treasuries have shown a notable move to the upside following the mixed economic data. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, is down by 3.7 basis points at 2.159 percent.