Daily Insight

U.S. stocks bounced between gain and loss on several occasions Monday, failing to ultimately hold onto an afternoon session rally as energy and basic materials shares sent the broad market lower in the final hour.

Dovish comments from the ultimate monetary dove Janet Yellen – President of the San Francisco Fed Bank – helped bank stocks as she stated the Fed will need to keep rates very low as the economy will operate below potential for the next two years. Yellen is not a current member of the rate-setting FOMC.

Financial and industrial shares were the only gainers among the 10 major sectors. As mentioned above, energy and basic material shares led the decline, along with utilities.

Oil prices advanced past the $80/barrel handle again, just two weeks back it looked as though crude was going below $70. The index that tracks energy stocks didn’t follow this move in crude though as shares of Schlumberger (which makes up roughly 6% of the index) weighed on the measure. The oil-services giant announced it would purchase Smith International in an all stock deal. Schlumberger shareholders didn’t like the premium the company decided to pay for Smith, so sent the stock lower as a result.

Volume was lackluster yet again as just 905 million shares traded on the NYSE Composite. That’s 21% below even the weak average volume of the past six months and 35% below what was considered the norm a couple of years back.
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Brent Vondera, Senior Analyst