RTTNews - Stocks are seeing notable weakness in mid-morning trading on Monday, with traders shrugging off some upbeat news from the Chicago-area manufacturing sector. The major averages are all firmly in negative territory after a disappointing start to the session.
Activity in the Chicago-area manufacturing sector unexpectedly reached neutral territory in August following ten consecutive months of contraction, according to a report released by the Institute for Supply Management - Chicago.
The ISM - Chicago said its index of manufacturing activity rose to 50.0 in August from 43.4 in July, with a reading of 50 acting as the breakeven point versus contraction and expansion. Economists had been expecting a more modest increase to a reading of 48.0.
This week, the market will have the opportunity to react to a series of economic reports, culminating with the August non-farm employment report on Friday. Additionally, the minutes of the August Federal Reserve meeting along with the Institute for Supply Management's manufacturing and services reports are also likely to be in the spotlight.
With payrolls expected to decline by almost as much as they did in July, the unemployment rate is expected to tick up slightly in August, as economists don't expect a quick fix for the ravaged job market. The report is expected to show a decrease of about 225,000 jobs in August.
At the same time, the manufacturing sector has been showing a gradual recovery from a deep contraction and may show an expansion in July. The manufacturing index based on the ISM's national survey is expected to show a reading above 50 after several months of sub-50 readings.
On the corporate front, Baker Hughes (BHI) said it has agreed to acquire BJ Services (BJS) in a deal valued at about $5.5 billion. Under the terms of the deal, BJ Services stockholders will receive 0.40035 shares of Baker Hughes and $2.69 in cash for each share of BJ Services common stock.
Separately, Walt Disney (DIS) announced that it has agreed to acquire Marvel Entertainment (MVL) in a stock and cash transaction. Marvel shareholders will receive a total of $30 per share in cash plus approximately 0.745 Disney shares for each Marvel share they own.
The major averages have moved roughly sideways in recent trading, stuck firmly in negative territory. The Dow is currently down 85.63 at 9,458.57, the Nasdaq is down 26.97 at 2,001.80 and the S&P 500 is down 11.80 at 1,017.13.
The retreat by the broader markets is being led by resource stocks, with oil service, steel, gold and natural gas stocks turning in some of the day's worst performances.
The weakness among resource stocks comes amid a pullback in commodities prices on the NYMEX, where oil is down by $2.22 at $70.52 per barrel and gold is falling by $9.40 to $949.40 per ounce.
Electronic storage stocks are also moving notably lower, with the NYSE Arca Disk Drive Index down by 2.2 percent. The loss is dragging the index away from the eleven-month closing high it set on Friday.
The index is being led lower by shares of Hutchinson Technology (HTCH), which are down by 2.4 percent, backing off of an eleven month high set in the previous session.
Housing and airline stocks are also showing notably weakness, with the Philadelphia Housing Sector Index and the NYSE Arca Airline Index down by 1.9 percent and 2.0 percent, respectively.
Semiconductor, healthcare provider, health insurance, transportation and networking stocks are also sliding on the day, reflecting the day's broad-based weakness.
Stocks Driven By Analyst Comments
Assured Guaranty Ltd. (AGO) is retreating in mid-morning trading after being downgraded by UBS to Neutral from Buy. The stock is down by 6.8 percent, backing further off of the eleven-month closing high set last week.
Morgan Stanley (MS) is also moving lower following a downgrade by Bank of America-Merrill Lynch to Neutral from Buy. The broker cited valuation as a reason for the ratings change, lowering its price target to $32 from $33. The stock has slipped by 3.5 percent, although it remains stuck in a trading range.
On the other hand, shares of GameStop (GME) are on the rise after receiving an upgrade from Goldman Sachs. The broker raised its rating to Buy from Neutral and placed the stock on its Conviction Buy List, saying that the firm's earnings expectations are beatable. The stock is up by 2 percent, but it also remains in a recent range.
In overseas trading, stock markets across the Asia-Pacific region closed mostly lower to start the week. Japan's benchmark Nikkei 225 Index slipped by 0.4 percent, while Hong Kong's Hang Seng Index fell by 1.9 percent.
The major European markets are also moving lower, with the French CAC 40 Index and the German DAX Index both down by 1 percent, while the U.K. market remains closed for a bank holiday.
In the bond markets, treasuries are seeing modest strength amid the retreat on Wall Street. Subsequently, the yield on the benchmark ten-year note is trading at 3.440 percent, posting loss of 1.1 basis points.
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