Stocks Remain Subdued In Mid-Afternoon Trading - U.S. Commentary

Mon. June 23, 2008; Posted: 02:39 PM

(RTTNews) - With little economic data released on Monday, stocks continue to turn in lackluster performances in mid-afternoon trading. Investors seem content to sit on the sidelines until the conclusion of the Federal Reserve meeting later in the week.

Despite the lack of direction being shown by the broader markets, energy stocks are seeing some strength amid an increase in the price of oil. The price increase comes even though Saudi Arabia announced over the weekend that it is willing to boost production if needed.

Saudi Arabia said Sunday that it would boost production for the third consecutive month following a meeting of top oil producing countries. The world's biggest oil exporter will add 200,000 barrels a day to its production in July, raising its total daily production to 9.7 million.

Nonetheless, weakness within the financial sector has offset the strength among energy stocks. The weakness among after Goldman downgraded the entire financial sector, stating that it will lag behind the rest of the markets.

In recent trading, the major averages have been lingering near the unchanged line, with the Nasdaq continuing to see a modest decline. While the Nasdaq is down 1.52 at 2,404.57, the Dow is up 20.59 at 11,863.28 and the S&P 500 is up 2.47 at 1,320.40.

Dow Components

The Dow is split between the gainers and the decliners, keeping the blue chip index close to the unchanged line. Of the 30 stocks that make up the Dow, 17 are showing strength while 13 are posting losses.

Merck (MRK | Quote | Chart | News | PowerRating) is also posting a substantial gain. Shares of the drug maker are up 2.2 percent, reversing a modest loss posted in the previous session. With the gain, the stock is on track to set a two-week closing high.

On the other hand, General Motors (GM | Quote | Chart | News | PowerRating) is seeing considerable selling pressure, extending a six-week downward trend. The stock is down 4.4 percent, on track to close at its lowest level in three decades. On Friday, Standard & Poor's put several automakers' credit ratings on credit watch with negative implications.

Taking its cue from the housing sector, Home Depot (HD | Quote | Chart | News | PowerRating) is also sharply lower. Shares of the home improvement retailer are falling 4.7 percent, adding to a loss posted in the previous session. With the decline, the stock is on track to set a three-month closing low.

Sector News

Oil and oil service stocks are turning in some of the best performances, boosted by the increase in the price of oil. The Amex Oil Index is climbing 2.2 percent, ending its three-day downward trend. The Philadelphia Oil Services Index is seeing a gain of 3.5 percent. With the gain, the oil services index is on track to set a record closing high.

Natural gas stocks are showing considerable strength as well. The Amex Natural Gas Index is up 3.4 percent, reversing losses posted in the past two sessions. The index is on track to set a new record closing high.

Utility stocks are also seeing notable gains, with the Philadelphia Utility Index climbing 1.1 percent. Despite the gain, the index remains stuck in a monthly trading range. Steel and pharmaceutical stocks are higher as well. The Amex Steel Index is up 1.3 percent, compared to a 1.1 percent gain by the Amex Pharmaceutical Index.

On the other hand, airline stocks are sharply lower, hurt by the increase in the price of oil. The Amex Airline Index is falling 5.2 percent, adding to a decline seen on Friday. Despite the loss, the index is well off of its record closing low, set earlier in the month.

Financial stocks, including bank and brokerage stocks, are showing weakness as well. Earlier, a Goldman Sachs analyst downgraded the entire financial sector, stating that it will lag behind the broader markets. The S&P Bank Index is down 2.7 percent, while the Amex Securities Broker/Dealer Index is falling 1.9 percent.

Other stocks that are sharply lower include retail, health insurance and housing stocks. The S&P Retail Index is down 2.1 percent, the Morgan Stanley Healthcare Payor Index is down 2.1 percent and the Philadelphia Housing Index is down 1.7 percent.

Other Markets

In overseas trading, the stock markets across the Asia-Pacific region closed mostly lower on Monday, tracking Wall Street's plunge on Friday amid a rebound in oil prices and continuing fallout from the U.S. credit crisis. Meanwhile, most the major European markets ended the session with moderate gains. The U.K.'s FTSE 100 Index posted a 0.8 percent gain.

Treasuries have seen additional selling pressure in afternoon trading, although the benchmark ten-year note has moved off of its worst level of the day in the past few minutes. Subsequently, the yield on the ten-year note is currently up 3.7 basis points at 4.174 percent.

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