U.S. Stocks Give Back Ground After Reaching New Record Highs

After moving to the upside early in the session, stocks have given back some ground over the course of the trading day on Tuesday. The major averages have pulled back well off their highs of the session, with the Nasdaq and the S&P 500 sliding into negative territory.

Currently, the major averages are turning in a mixed performance. While the Dow is up 25.63 points or 0.1 percent at 31,484.03, the Nasdaq is down 51.84 points or 0.4 percent at 14,043.64 and the S&P 500 is down 3.59 points or 0.1 percent at 3,931.24.

The early strength on Wall Street largely reflected recent upward momentum, which has propelled the major averages to new record highs despite a lack of major catalysts.

Optimism about additional stimulus from Washington has helped prop up the markets as Democrats continue to move forward with President Joe Biden’s proposed $1.9 trillion relief package.

Recent signs indicating the coronavirus crisis is easing following a recent surge has also generated buying interest as countries around the world continue to ramp up vaccine rollouts.

The positive sentiment also came following last Friday’s drop by the CBOE Market Volatility Index, which closed below 20 for the first time in nearly a year.

The decrease by the closely watched volatility index suggests there is reduced fear in the markets following the spike seen in reaction to speculative trading in stocks like GameStop (GME).

Buying interest waned over the course of the morning, however, leading some traders to cash in on the recent strength in the markets.

In U.S. economic news, the Federal Reserve Bank of New York released a report showing New York manufacturing activity grew at its fastest pace in months in February.

The New York Fed said its general business conditions index climbed to 12.1 in February from 3.5 in January, with a positive reading indicating growth in regional manufacturing activity. Economists had expected the index to rise to 6.0.

With the much bigger than expected increase, the general business conditions index reached its highest level since hitting 17.0 last September.

A slew of economic data is due to be released in the comings days, including reports on retail sales, industrial production, housing starts, and existing home sales.

Sector News

Despite the lack of direction being shown by the broader markets, substantial strength remains visible among energy stocks.

The rally by energy stocks comes as the price of crude oil has moved higher after a winter storm shut down oil wells and refineries in Texas. Crude for March delivery is off its highs but remains up $0.42 at $59.89 a barrel.

Reflecting the strength in the energy sector, the Philadelphia Oil Service Index is up by 2.8 percent, NYSE Arca Oil Index is up by 2,5 percent and the NYSE Arca Natural Gas Index is up by 1.6 percent.

Banking stocks also continue to turn in a strong performance in mid-day trading, with the KBW Bank Index jumping by 2.8 percent to its best intraday level in over a year.

On the other hand, biotechnology stocks have come under pressure over the course of the session, dragging the NYSE Arca Biotechnology Index down by 2.5 percent.

Gold stocks have also shown a notable move to the downside, resulting in a 1.8 percent drop by the NYSE Arca Gold Bugs Index.

The weakness among gold stocks comes amid a steep drop by the price of the precious metal, as gold for April delivery is slumping $22.60 to $1,800.60 an ounce.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved mostly higher during trading on Tuesday. Japan’s Nikkei 225 Index jumped by 1.3 percent, while Hong Kong’s Hang Seng Index soared by 1.9 percent.

Meanwhile, the major European markets turned in a lackluster performance on the day. While the French CAC 40 Index closed just above the unchanged line, the U.K.’s FTSE 100 Index edged down by 0.1 percent and the German DAX Index dipped by 0.3 percent.

In the bond market, treasuries have come under pressure, driving the yield on the benchmark ten-year note to its highest level in almost a year. The yield on the ten-year note, which moves opposite of its price, is up by 8.7 basis points at 1.287 percent.

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