The U.S. stock markets saw significant volatility over the course of the trading session on Monday, with the major averages bouncing back and forth across the unchanged line. The choppy trading comes ahead of the Federal Reserve’s interest rate decision later this week. After showing a lack of direction in early trading, the major averages showed a strong upward move over the course of the morning. Nonetheless, traders cashed in on the gains in the afternoon, contributing to a significant pullback by the major averages. The major averages regained some ground going into the close, but they still all closed in negative territory. The Dow closed down 8.21 at 13,352.05, the NASDAQ closed down 11.88 at 2,577.08 and the S&P 500 closed down 4.82 at 1,497.74.
The volatility that was seen came as traders are looking ahead to the two-day Federal Open Market Committee meeting beginning on Wednesday. After the meeting, the FOMC, the policy-setting arm of the Federal Reserve, will announce its decision on interest rates. Traders will be paying close attention to any changes in the FOMC’s statement following the meeting, as the committee is widely expected to vote to leave interest rates unchanged for the eighth consecutive time.
A significant turnaround by the price of oil also contributed to the volatility that was seen in the markets, with crude for August delivery closing up $0.04 at $69.18 a barrel after hitting a low of $67.55 a barrel. The turnaround was partly due to reports that Exxon Mobil (XOM) and ConocoPhillips (COP) have refused to sign a deal to stay in projects in Venezuela that are being nationalized. The news offset selling pressure that was generated by the end of a general strike in Nigeria. Despite the turnaround, significant weakness remained visible in the oil service sector, as reflected by the 2.3 percent loss posted by the Philadelphia Oil Service Index. The loss by the index came after it ended the previous session at a record closing high.
Gold stocks also came under pressure on Monday, as the price of the precious metal saw some further downside after closing lower last week. With gold for August delivery closing down $2.30 at $654.70 an ounce, the Amex Gold Bugs Index closed down 2.1 percent.
The housing sector also showed a notable decline over the course of the trading session, resulting in a 1.6 percent loss by the Philadelphia Housing Sector Index. With the loss, the index ended the session at a seven-month closing low. The weakness among housing stocks came after a report from the National Association of Realtors showed that existing home sales edged down 0.3 percent to an annual rate of 5.99 million units in May from an upwardly revised pace of 6.01 million in April.
Brokerage stocks also saw some weakness, as traders continued to worry about the problems at two of Bear Stearns” (BSC) hedge funds. Considerable weakness was also visible in the airline, semiconductor, and natural gas sectors. Meanwhile, tobacco and utilities stocks saw some strength, although they ended the session well off their best levels of the day. General Motors (GM) also posted a notable gain, helping to limit the downside for the Dow. GM closed up 2.3 percent after Goldman Sachs upgraded its rating on the auto giant’s stock to Buy from Neutral. Goldman Sachs attributed the upgrade to expectations that GM will be able to achieve a greater level of concessions from the United Auto Workers union than the market anticipates.
Economic data is likely to attract some attention on Tuesday, with the Conference Board scheduled to release its report on consumer confidence in June and the Commerce Department due to release its report on new home sales in May.
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