By Tanya Agrawal
U.S. stocks pared gains in late morning trading on Monday, as a recovery in technology stocks and oil prices stalled.Oil prices hovered near last week's seven-month lows, hemmed in by a relentless rise in U.S. supply, bloated global inventories and a surge in demand for short sale contracts that signals investors see potential for a price fall.The S&P energy fell 0.37 percent and was the biggest laggard among the major S&P sectors.Oil majors Exxon and Chevron were down about 0.6 percent and were among the biggest drags on the three major indexes.The recent drop in oil prices has spurred concerns about low inflation, which stubbornly remains below the Federal Reserve's 2 percent target rate.The central bank raised rates this month for the second time this year and is expected to raise it again. Futures imply only a 50 percent chance of another rate hike by December.Also dampening sentiment was a fall in technology stocks, as investors, worried about stretched valuations, switch to defensive sectors.
The S&P utilities and telecommunications sectors led the gainers. At 11:03 a.m. ET (1503 GMT), the Dow Jones Industrial Average was up 1.85 points, or 0.01 percent, at 21,396.61, the S&P 500 was up 1.06 points, or 0.04 percent, at 2,439.36.The Nasdaq Composite was down 18.40 points, or 0.29 percent, at 6,246.85.The financial index rose 0.59 percent after a string of Federal Reserve policymakers appeared to back another rate hike this year despite a patch of recent weak economic data.
San Francisco Fed President John Williams said the Fed needs to raise rates gradually or the economy runs the risk of overheating.New York Fed chief William Dudley said recent narrowing of credit spreads, record stock prices and falling bond yields could encourage the Fed to continue tightening U.S. policy."We're seeing a very fast rotation that's been typical of the past month or so and it's not necessarily based on what's happening on the yield curve," said Art Hogan, chief market strategist at Wunderlich Securities in New York.
"It's based more on the economic conversations that we've been seeing from a parade of Fed speakers who continue to tell that same story that we'll see another rate hike this year."The spread between the U.S. two-year and 10-year bond yield curve flattened to its lowest since September.Data on Monday showed new orders for key U.S.-made capital goods unexpectedly fell in May, with non-defense orders excluding aircraft - a closely watched proxy for business spending plans - dropping 0.2 percent.Economists polled by Reuters had expected a rise of 0.3 percent.Micron was up 1.7 percent at $32.28 after Cowen & Co increased its price target on the chipmaker's stock.Advancing issues outnumbered decliners on the NYSE by 1,681 to 1,113. On the Nasdaq, 1,415 issues fell and 1,302 advanced. (Reporting by Tanya Agrawal; Editing by Arun Koyyur)
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Updated Date: Jun 26, 2017 21:56 PM