Stocks Close In The Red Following Late-Day Pullback - U.S. Commentary

(RTTNews) - After trading mostly higher for much of the session, stocks reversed course late in the trading day on Monday to close in the red. Worries about the situation in Syria weighed on the markets following comments from Secretary of State John Kerry.

The major averages all ended the day in negative territory, although the Nasdaq closed only slightly lower. While the Nasdaq edged down 0.22 points or less than 0.1 percent to 3,657.57, the Dow fell 64.05 points or 0.4 percent to 14,946.46 and the S&P 500 slid 6.72 points or 0.4 percent to 1,656.78.

The pullback seen in late-day trading came as Kerry delivered remarks that suggested that the U.S. is likely to take military action in Syria in response to the use of chemical weapons.

Kerry indicated that the use of chemical weapons by the Syrian government is "undeniable" and argued that there must be accountability for the attack on civilians.

"Make no mistake: President Obama believes there must be accountability for those who would use the world's most heinous weapons against the world's most vulnerable people," Kerry said. "Nothing today is more serious and nothing is receiving more serious scrutiny."

Worries about U.S. intervention in Syria having a destabilizing impact on the Middle East offset earlier buying interest generated by a Commerce Department report showing that orders for U.S. manufactured durable goods fell by more than expected in the month of July.

The report said durable goods orders tumbled by 7.3 percent in July following a 3.9 percent increase in June. Economists had expected orders to fall by about 4.0 percent.

Excluding a sharp pullback in orders for transportation equipment, durable goods orders fell by a more modest 0.6 percent in July compared to a 0.1 percent increase in the previous month.

While the data raised concerns about the outlook for the manufacturing sector, it also suggests that the Federal Reserve may delay its decision to begin scaling back its stimulus program.

Bernd Weidensteiner, economist for Commerzbank AG said, "While aircraft orders have been especially hard hit, the other details also show broad-based weakness."

"One should, of course, not read too much into volatile order data," he added. "However, this is only the last instance of a certain loss of economic momentum. Tapering in September is therefore not a foregone conclusion."

Sector News

A majority of the major sectors ended the day in the red following the late-day pull back, although most showed relatively modest moves to the downside.

Banking, utilities and airline stocks turned in some of the market's worst performances, giving back ground after moving higher in the latter part of last week.

Despite the pullback by the broader markets, however, significant strength remained visible among biotechnology stocks. Reflecting the strength in the sector, the NYSE Arca Biotechnology Index advanced by 2 percent.

Within the biotech sector, Amgen (AMGN) and Onyx Pharmaceuticals (ONXX) posted strong gains after Amgen agreed to acquire Onyx for $125 per share in cash. The transaction is valued at $10.4 billion.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved mostly higher on Monday. Hong Kong's Hang Seng Index advanced by 0.7 percent, while Australia's All Ordinaries Index inched up by 0.2 percent. However, Japan's Nikkei 225 Index bucked the uptrend and dipped by 0.2 percent.

Meanwhile, the major European markets ended the day mixed. The French CAC 40 Index edged down by 0.1 percent, while the German DAX Index rose by 0.2 percent. The U.K.'s markets were closed for a public holiday.

In the bond market, treasuries saw modest strength on the day on the heels of the weaker than expected durable goods data. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, edged down by 1.3 basis points to 2.805 percent.

Looking Ahead

While traders are likely to keep an eye on any developments in Syria, trading on Tuesday could also be impacted by the release of reports on home prices and consumer confidence.