U.S. Stocks Pulling Back Sharply As Initial Buying Interest Fades

Stocks have moved sharply lower over the course of the trading session on Monday after failing to sustain an initial move to the upside. The major averages have pulled back firmly into negative territory, partly offsetting the strong gains posted last year.

In recent trading, the major averages have fallen to new lows for the session. The Dow is down 644.77 points or 2.1 percent at 29,961.71, the Nasdaq is down 228.38 points or 1.8 percent at 12,659.90 and the S&P 500 is down 73.41 points or 2 percent at 3,682.66.

Upward momentum to start the New Year contributed to the initial strength on Wall Street, although buying interest waned shortly after the open.

The subsequent pullback partly reflected profit taking after the Dow and the S&P 500 reached new record intraday highs.

Traders may also have been reluctant to continue pushing stocks higher amid uncertainty ahead of two key Senate runoffs in Georgia on Tuesday.

The outcome of the runoff elections will determine which party controls the Senate and could have a major impact on what President-elect Joe Biden is able to accomplish.

Traders may also be looking ahead to Friday's closely watched monthly jobs report, which is expected to show a continued slowdown in the pace of job growth in the month of December.

The sharp pullback on Wall Street may also reflect the recent spike in coronavirus cases in several parts of the world, with a new strain of the virus being detected in the U.S. for the first time.

Japanese Prime Minister Yoshihide Suga is considering declaring a state of emergency in the greater Tokyo area to curb the spread of the coronavirus, while U.K. Prime Minister Boris Johnson is expected to announce new restrictions later today.

On the U.S. economic front, the Commerce Department released a report showing a continued increase in construction spending in the month of November.

The report said construction spending climbed by 0.9 percent to an annual rate of $1.459 trillion in November after surging up by 1.6 percent to a revised rate of $1.447 trillion in October.

Economists had expected construction spending to increase by 1.0 percent compared to the 1.3 percent jump originally reported for the previous month.

Sector News

Airline stocks have shown a substantial move to the downside on the day amid concerns about new travel restrictions amid spiking coronavirus cases.

Reflecting the weakness in the airline sector, the NYSE Arca Airline Index has plunged by 4.9 percent, hitting its lowest intraday level in well over a month.

Considerable weakness is also visible among commercial real estate stocks, as reflected by the 2.9 percent slump by Dow Jones U.S. Real Estate Index.

Housing, software and networking stocks are also seeing significant weakness in mid-day trading, moving lower along with most of the other major sectors.

On the other hand, gold stocks remain sharply higher on the day, resulting in a 6.8 percent spike by the NYSE Arca Gold Bugs Index. The index has reached its best intraday level in nearly two months.

The rally by gold stocks comes as the price of gold for February delivery is soaring $48.60 to $1,943.70 an ounce amid a drop in the value of the U.S. dollar.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved mostly higher on Monday, although Japan's Nikkei 225 Index bucked the uptrend and slid by 0.7 percent. China's Shanghai Composite Index advanced by 0.9 percent, while South Korea's Kospi spiked by 2.5 percent.

The major European markets also moved to the upside on the day but closed well off their best levels. While the U.K.'s FTSE 100 Index surged up by 1.7 percent, the French CAC 40 Index climbed by 0.7 percent and the German DAX Index inched up by 0.1 percent.

In the bond market, treasuries have bounced back near the unchanged line after seeing earl weakness. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, is down by less than a basis point at 0.912 percent.

Market Analysis