Stocks Close Firmly In Negative Territory - U.S. Commentary

(RTTNews) - After seeing notable strength in the previous week, stocks moved to the downside during trading on Monday. With the drop on the day, the tech-heavy Nasdaq pulled back further off the record closing high set last Thursday.

The major averages ended the day firmly in negative territory, just off their lows of the session. The Dow slid 166.62 points or 0.9 percent to 18,094.83, the Nasdaq fell 48.26 points or 0.9 percent to 5,257.49 and the S&P 500 dropped 18.59 points or 0.9 percent to 2,146.10.

Weakness overseas generated some negative sentiment on Wall Street, as traders cashed in on the gains seen in reaction to the Federal Reserve's decision to leave interest rates unchanged.

Trading activity remained somewhat subdued, however, with traders looking ahead to tonight's highly anticipated presidential debate.

The first face-to-face matchup between Donald Trump and Hillary Clinton could have a substantial impact on the race for the White House.

A new Wall Street Journal/NBC News poll found that a third of voters think the presidential debates will be "extremely important" or "quite important" in deciding whom to support for president.

On the U.S. economic front, the Commerce Department released a report showing a sharp pullback in new home sales in the month of August.

The report said new home sales tumbled by 7.6 percent to an annual rate of 609,000 in August after surging up by 13.8 percent to a revised 659,000 in July.

Economists had expected new home sales to drop to a rate of 598,000 from the 654,000 originally reported for the previous month.

The decrease in new home sales came after they reached their highest annual rate in well over eight years in July.

Sector News

Brokerage stocks saw substantial weakness on the day, resulting in a 2.3 percent drop by the NYSE Arca Broker/Dealer Index. The index continued to give back ground after reaching an eight-month closing high last Thursday.

Stifel Financial (SF), LPL Financial (LPLA), and Cowen Group (COWN) turned in some of the brokerage sector's worst performances.

Significant weakness was also visible among banking stocks, as reflected by the 2.2 percent loss posted by the Dow Jones Banks Index.

Airline stocks also came under pressure over the course of the session, dragging the NYSE Arca Airline Index down by 1.8 percent. Copa Airlines parent Copa Holdings (CPA) and United Continental (UAL) posted sizable losses.

Tobacco, pharmaceutical, and retail stocks also saw notable weakness, while most of the other major sectors showed more modest moves.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved mostly lower during trading on Monday. Japan's Nikkei 225 Index slumped by 1.3 percent, while Hong Kong's Hang Seng Index tumbled by 1.6 percent.

The major European markets also showed notable moves to the downside on the day. While the U.K.'s FTSE 100 Index dove by 1.3 percent, the French CAC 40 Index and the German DAX Index plummeted by 1.8 percent and 2.2 percent, respectively.

In the bond market, treasuries moved moderately higher, extending a recent upward trend. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, dropped by 2.6 basis points to 1.589 percent.

Looking Ahead

Trading on Tuesday may be impacted by reaction to tonight's first presidential debate as well as reports on home prices and consumer confidence.