U.S. Stocks Showing A Lack Of Direction Following Recent Weakness

Stocks have shown a lack of direction over the course of the trading session on Monday, with the major averages swinging back and forth across the unchanged line following the steep losses posted last week.

The major averages are currently turning in a mixed performance. While the tech-heavy Nasdaq is up 23.16 points or 0.2 percent at 10,891.08, the S&P 500 is down 14.66 points or 0.4 percent at 3,678.57 and the Dow is down 182.94 points or 0.6 percent at 29,407.47.

The choppy trading on Wall Street comes as traders express some uncertainty about the near-term outlook for the markets following recent weakness.

The sell-off seen last week dragged the Dow down to its lowest closing level in over a year, while the Nasdaq and the S&P 500 hit three-month closing lows.

While some traders have looked to pick up stocks at reduced levels, concerns about the outlook for the global economy continue to weigh on the markets.

The Federal Reserve and other central banks around the world have indicated they plan to continue raising interest rates in an effort to combat stubbornly elevated inflation, leading to worries higher rates will lead to a global recession.

A continued surge in the value of the U.S. dollar has also generated some negative sentiment, with the greenback hitting a record high versus the British pound.

Aggressive interest rate hikes by the Fed continue to contribute to the increase by the dollar along with Britain’s new chancellor Kwasi Kwarteng’s announcement of a sweeping package of tax cuts.

“Such U.S. dollar strength has historically led to some kind of financial/economic crisis,” said Morgan Stanley chief U.S. equity strategist Michael Wilson. “If there was ever a time to be on the lookout for something to break, this would be it.”

Airline stocks are extending a recent sell-off, resulting in a 2.5 percent nosedive by the NYSE Arca Airline Index. The index has plummeted to its lowest intraday level in over two years.

Substantial weakness is also visible among interest rate-sensitive commercial real estate and utilities stocks, with the Dow Jones U.S. Real Estate Index and the Dow Jones Utility Average tumbling by 2.2 percent and 1.8 percent, respectively.

Natural gas stocks are also seeing considerable weakness amid a decrease by the price of the commodity, dragging the NYSE Arca Natural Gas Index down by 1.7 percent to a two-month intraday low.

Banking, telecom and housing stocks have also shown notable moves to the downside, while retail stocks are seeing some strength on the day.

In overseas trading, stock markets across the Asia-Pacific region moved notably lower during trading on Monday. Japan’s Nikkei 225 Index plunged by 2.7 percent, while China’s Shanghai Composite Index slumped by 1.2 percent.

The major European markets have also moved to the downside on the day. While the U.K.’s FTSE 100 Index is just below the unchanged line, the German DAX Index and the French CAC 40 Index are both down by 0.2 percent.

In the bond market, treasuries have moved back to the downside after ending last Friday’s trading slightly higher. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, is up by 7.6 basis points at 3.773 percent.

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