Traders May Stick to Sidelines After Last Week’s Sell-Off

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By Investors Hub

The major U.S. index futures are pointing to a roughly flat open on Monday following the sell-off seen on Wall Street last week.

Traders may look to pick up stocks at reduced levels, although concerns about the global economic outlook and skepticism about the potential for a long-term trade deal between the U.S. and China is likely to sap investors risk appetite.

Overall trading activity may be somewhat subdued, with a lack of major U.S. economic data likely to keep some traders on the sidelines.

The economic calendar remains relatively light throughout the week, although reports on producer and consumer price inflation, retail sales, and industrial production are likely to attract attention.

Traders may nonetheless remain reluctant to make significant moves ahead of the Federal Reserve?s monetary policy meeting next week.

With the Fed widely expected to raise interest rates by another quarter point, traders will closely scrutinize the accompanying statement for clues about future rate hikes.

Traders may look to pick up stocks at reduced levels on the heels of last week?s sell-off, which came amid skepticism about the potential for a long-term trade deal between the U.S. and China.

Overall trading activity may be somewhat subdued, however, with a lack of major U.S. economic data likely to keep some traders on the sidelines.

The economic calendar remains relatively light throughout the week, although reports on producer and consumer price inflation, retail sales, and industrial production are likely to attract attention.

Traders may nonetheless be reluctant to make significant moves ahead of the Federal Reserve?s monetary policy meeting next week.

With the Fed widely expected to raise interest rates by another quarter point, traders will closely scrutinize the accompanying statement for clues about future rate hikes.

After fluctuating early in the session, stocks moved sharply lower over the course of the trading day on Friday. The major averages showed a substantial move back to the downside following the rebound from early weakness seen on Thursday.

The major averages climbed off their worst levels going into the close but remained firmly negative. The Dow tumbled 558.72 points or 2.2 percent to 24,388.95, the Nasdaq plunged 219.01 points or 3.1 percent to 6,969.25 and the S&P 500 slumped 62.87 points or 2.3 percent to 2,633.08.

With the steep drop on the day, the major averages moved significantly lower for the week. The Nasdaq nosedived by 4.9 percent, while the Dow and the S&P 500 plummeted by 4.5 percent and 4.6 percent, respectively.

The sell-off on Wall Street came after the Labor Department’s closely watched monthly jobs report showed U.S. employment increased by much less than expected in the month of November.

The Labor Department said non-farm payroll employment rose by 155,000 jobs in November after surging up by a downwardly revised 237,000 jobs in October.

Economists had expected employment to climb by about 200,000 jobs compared to the jump of 250,000 jobs originally reported for the previous month.

Meanwhile, the report said the unemployment rate in November remained unchanged for the second straight month at 3.7 percent, holding at its lowest level since hitting 3.5 percent in December of 1969.

Average hourly employee earnings rose by $0.06 to $27.35 in November, reflecting a 3.1 percent increase compared to the same month a year ago. The annual rate of growth was unchanged from October.

“The slightly more modest 155,000 gain in payroll employment in November may not go down well in markets given the heightened nervousness in recent months,” said Paul Ashworth, Chief U.S. Economist at Capital Economics.

“But this is still a solid gain that suggests economic growth is gradually slowing back towards its potential pace,” he added. “There is nothing here to suggest the economy is suffering a more sudden downturn.”

Lingering skepticism about a U.S.-China trade agreement also weighed on the markets even though President Donald Trump tweeted, “China talks are going very well!”

Most of the major sectors showed notable moves to the downside over the course of the session, reflecting a broad based sell-off on Wall Street.

Computer hardware stocks showed a particularly steep drop on the day, dragging the NYSE Arca Computer Hardware Index down by 4.1 percent to a nearly two-year closing low.

Tech giant IBM Corp. (IBM) posted a significant loss after agreeing to sell some of its software products to India-based HCL Technologies for $1.8 billion.

Substantial weakness was also visible among transportation stocks, as reflected by the 3.9 percent nosedive by the Dow Jones Transpiration Average. The average tumbled to its lowest closing level in well over a month.

Semiconductor, software, biotechnology, and retail stocks also saw considerable weakness, while gold stocks were among the few groups to buck the downtrend amid an increase by the price of the precious metal.

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