Stocks Turning In Lackluster Performance As Fed Decision Looms - U.S. Commentary

(RTTNews) - With traders looking ahead to the Federal Reserve's monetary policy announcement later this week, stocks are largely showing a lack of direction during trading on Monday. Technology stocks are seeing significant weakness, however, resulting in a sharp drop by the tech-heavy Nasdaq.

Currently, the major averages are turning in a mixed performance, as the Dow has crept above the unchanged line. While the Dow is up 14.25 points or 0.1 percent at 17,001.76, the Nasdaq is down 51.60 points or 1.1 percent at 4,515.99 and the S&P 500 is down 5.27 points or 0.3 percent at 1,980.27.

The lackluster performance on Wall Street partly reflects uncertainty about the monetary policy outlook ahead of the Fed's announcement on Wednesday.

The Fed is widely expected to announce a further reduction in the pace of its asset purchases, although traders are likely to pay closer attention to any suggestions regarding the outlook for interest rates.

Recent upbeat economic data has led to some concerns that the Fed may signal that it plans to begin raising rates sooner than previously anticipated.

Traders are also digesting some disappointing Chinese economic reports as well as a mixed batch of U.S. economic data.

The Chinese National Bureau of Statistics reported weaker than expected retail sales growth in August, while a separate report showed that Chinese industrial output also rose by less than expected.

On the U.S. economic front, the New York Federal Reserve released a report showing that business activity in the New York manufacturing sector has expanded at a robust pace in September.

The New York Fed said its headline general business conditions index surged up to 27.5 in September from 14.7 in August, with a positive reading indicating an increase in activity in the New York manufacturing sector. Economists had expected the index to edge up to 16.0.

With the much bigger than expected increase, the general business conditions index reached its highest level since hitting 32.6 in October of 2009.

Meanwhile, a separate report released by the Federal Reserve showed an unexpected drop in industrial production in the month of August.

The Fed said industrial production edged down by 0.1 percent in August after inching up by a downwardly revised 0.2 percent in July.

The modest drop came as a surprise to economists, who had expected production to climb by 0.3 percent compared to the 0.4 percent increase originally reported for the previous month.

Sector News

Biotechnology stocks continue to see substantial weakness in mid-day trading, with the NYSE Arca Biotechnology Index tumbling by 2.3 percent. With the loss, the index is pulling back further off the record closing high it set last Wednesday.

Exact Sciences (EXAS) and Nektar Therapeutics (NKTR) are turning in two of the biotech sector's worst performances, plunging by 7.2 percent and 5.1 percent, respectively.

Significant weakness also remains visible among electronic storage stocks, as reflected by the 2.2 percent loss being posted by the NYSE Arca Disk Drive Index. The index is giving back ground after ending the previous session at a three-year closing high.

Internet, networking, and semiconductor stocks are also under considerable pressure on the day, contributing to the steep loss being posted by the Nasdaq.

Outside of the tech sector, airline and tobacco stocks are also seeing notable weakness, while most of the other major sectors are showing more modest moves.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved mostly lower on Monday, although the Japanese markets were closed for a holiday. Hong Kong's Hang Seng Index and Australia's All Ordinaries Index both dropped by 1 percent.

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

In the bond market, treasuries have pulled back off their best levels but continue to see modest strength. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, is down by 1.8 basis points at 2.596 percent.