U.S. Stocks Recover From Early Weakness To Close Mostly Higher
After recovering from an initial move to the downside, stocks moved mostly higher over the course of the trading session on Tuesday. The major averages climbed well off their early lows and firmly into positive territory.
The major averages finished the day near their best levels of the session. The Dow rose 123.91 points or 0.4 percent to 33,052.87, the Nasdaq climbed 61.76 points or 0.5 percent to 12,851.24 and the S&P 500 advanced 26.98 points or 0.7 percent to 4,193.80.
The early weakness on Wall Street partly reflected a negative reaction to a report from the Labor Department showing employment costs jumped by slightly more than expected in the third quarter.
The Labor Department said its employment cost index shot up by 1.1 percent in the third quarter compared to economist estimates for a 1.0 percent advance.
However, the report also showed the annual rate of growth by the employment cost index slowed to 4.3 percent in the third quarter from 4.5 percent in the second quarter.
Selling pressure waned shortly after the start of trading, as traders seemed reluctant to make significant moves ahead of the Federal Reserve’s monetary policy announcement on Wednesday.
While the Fed is widely expected to leave interest rates unchanged, traders will pay close attention to the accompanying statement for clues about the outlook for rates.
CME Group’s FedWatch Tool is currently indicating a 97.1 percent chance the Fed will leave rates unchanged on Wednesday and a 68.9 percent chance rates will remain unchanged in December.
“The Fed is still wary of letting their guard down too early after missing their inflation target badly in the last few years,” said Bill Adams, Chief Economist for Comerica Bank.
He added, “They are likely to signal tomorrow that they are prepared to raise interest rates again if inflation strays from its current downward trajectory.”
The subsequent rebound by stocks came as traders resumed yesterday’s bargain hunting, as stocks remain at relatively reduced levels despite the rally seen in the previous session.
Networking stocks showed a substantial rebound on the day, with the NYSE Arca Networking Index surging by 2.7 percent after tumbling to its lowest closing level in well over a year on Monday.
Arista Networks (ANET) led the way back to the upside after the cloud networking solutions company reported third quarter results that beat expectations on both the top and bottom lines.
Considerable strength also emerged among commercial real estate stocks, resulting in a 1.8 percent jump by the Dow Jones U.S. Real Estate Index.
Housing, banking and telecom stock also turned in strong performances, while gold and airline stocks showed notable moves to the downside.
Within the airline sector, shares of JetBlue (JBLU) plummeted after the airline reported third quarter results that fell short of analyst estimates.
In overseas trading, stock markets across the Asia-Pacific region turned in another mixed performance during trading on Tuesday. While Japan’s Nikkei 225 Index climbed by 0.5 percent, Hong Kong’s Hang Seng Index tumbled by 1.7 percent.
Meanwhile, European stocks moved mostly higher on the day. The French CAC 40 Index advanced by 0.9 percent and the German DAX Index climbed by 0.6 percent, although the U.K.’s FTSE 100 Index bucked the uptrend and edge down by 0.1 percent.
In the bond market, treasuries pulled back near the unchanged line after seeing early strength. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, ended the day unchanged at 4.875 percent after hitting a low of 4.803 percent.
The Fed’s announcement will be in the spotlight on Wednesday, likely overshadowing reports on manufacturing activity, construction spending and job openings as well as the latest earnings news.
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