Stocks Showing A Lack Of Direction In Mid-Day Trading - U.S. Commentary

(RTTNews) - After failing to sustain an initial upward move, stocks have shown a lack of direction over the course of the trading session on Tuesday. The major averages have spent the day bouncing back and forth across the unchanged line.

Currently, the major averages are posting modest gains. The Dow is up 14.22 points or 0.1 percent at 18,506.18, the Nasdaq is up 16.25 points or 0.3 percent at 5,266.15 and the S&P 500 is up 2.58 points or 0.1 percent at 2,182.56.

The choppy trading on Wall Street comes following the release of a report from the Institute for Supply Management showing that service sector growth in the U.S. slowed to its lowest rate in over six years in the month of August.

The ISM said its non-manufacturing index tumbled to 51.4 in August from 55.5 in July, falling to its lowest level since February of 2010.

While a reading above 50 indicates continued growth in the service sector, economists had expected the index to show a much more modest drop to 55.0.

Last Thursday, the ISM released a separate report showing that manufacturing activity in the U.S. unexpectedly contracted in the month of August.

The data has further reduced the likelihood that the Federal Reserve will raise interest rates later this month, although traders also seem concerned about the economic outlook.

Nonetheless, overall trading activity has remained somewhat subdued, as some traders may be staying away from their desks following the Labor Day holiday on Monday.

Traders may also be reluctant to make any significant moves ahead of the release of the Fed's Beige Book report Wednesday afternoon.

The Beige Book, a compilation of anecdotal evidence on economic conditions in the twelve Fed districts, may shed some additional light on the outlook for interest rates.

Sector News

Many of the major sectors are showing only modest moves on the day, although substantial strength is visible among gold stocks. Reflecting the strength in the gold sector, the NYSE Arca Gold Bugs Index has surged up by 3.3 percent.

The rally by gold stocks comes amid a sharp increase by the price of the precious metal, with gold for December delivery jumping $18 to $1,344.70 an ounce.

Considerable strength is also visible among biotechnology stocks, as reflected by the 3.2 percent gain being posted by the NYSE Arca Biotechnology Index.

Molecular diagnostics company Cepheid (CPHD) is leading the biotech sector higher, soaring by 51.8 percent after agreeing to be acquired by Danaher (DHR) for $4 billion.

On the other hand, financial stocks have come under pressure on the day, with the Dow Jones Banks Index and the NYSE Arca Broker/Dealer Index slumping by 1.3 percent and 1.2 percent, respectively.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved mostly higher during trading on Tuesday. Japan's Nikkei 225 Index rose by 0.3 percent, while Hong Kong's Hang Seng Index climbed by 0.6 percent.

Meanwhile, the major European markets turned in a mixed performance on the day. While the German DAX Index inched up by 0.1 percent, the French CAC 40 Index edged down by 0.2 percent and the U.K.'s FTSE 100 Index slid by 0.8 percent.

In the bond market, treasuries have moved higher on the heels of the disappointing service sector data. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, is down by 5 basis points at 1.546 percent.