U.S. Stocks Climb Firmly Into Positive Territory After Early Pullback

Stocks failed to sustain an initial advance but have moved back to the upside over the course of the trading session on Wednesday. The major averages have recovered from the early pullback and climbed firmly into positive territory.

Currently, the major averages are off their highs of the session but holding on to notable gains. The Dow is up 204.84 points or 0.6 percent at 33,341.21, the Nasdaq is up 100.12 points or 1.0 percent at 10,487.10 and the S&P 500 is up 40.88 points or 1.1 percent at 3,865.02.

Stocks on Wall Street may be benefitting from strength in overseas markets, which moved higher following encouraging European inflation data and indications the latest Covid wave in China may have peaked.

Traders may also once again be looking to pick up stocks at reduced levels following the significant weakness seen last year.

However, the volatility seen over the course of the session comes as traders look ahead to the release of the minutes of the latest Federal Reserve meeting.

The minutes of the Fed’s December meeting, which are due to be released this afternoon, could shed additional light on the outlook for interest rates.

On the U.S. economic front, the Institute for Supply Management released a report showing U.S. manufacturing activity contracted at a slightly faster rate in the month of December.

The ISM said its manufacturing PMI edged down to 48.4 in December from 49.0 in November, with a reading below 50 indicating a contraction. Economists had expected the index to slip to 48.5.

Manufacturing activity contracted for the second consecutive month after expanding for 29 straight months, with the manufacturing PMI falling to its lowest level since hitting 43.5 in May 2020.

Paul Ashworth, Chief North America Economist at Capital Economics, called the decrease by the manufacturing PMI “another sign that the economy was losing momentum at the tail-end of last year.”

“Nearly all the survey-based evidence points to a complete stagnation or even contraction in activity,” Ashworth added.

Sector News

Airline stocks have moved sharply higher over the course of the session, with the NYSE Arca Airline Index soaring by 5.6 percent.

Substantial strength also remains visible among gold stocks, as reflected by the 4.5 percent spike by the NYSE Arca Gold Bugs Index. The rally by gold stocks comes as the price of gold for February delivery is climbing $12.30 to $1,858.40 an ounce.

Commercial real estate stocks have also shown a significant move to the upside on the day, driving the Dow Jones U.S. Real Estate Index up by 2.9 percent.

Semiconductor, banking and computer hardware stocks are also seeing considerable strength, while software stocks are among the few groups bucking the uptrend amid a steep drop by Microsoft (MSFT).

Shares of Microsoft (MSFT) have plunged by 4.6 percent after UBS downgraded its rating on the software giant’s stock to Neutral from Buy.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved mostly higher, although Japanese stocks bucked the uptrend. While Japan’s Nikkei 225 Index slumped by 1.5 percent, Hong Kong’s Hang Seng Index spiked by 3.2 percent and South Korea’s Kospi jumped by 1.7 percent.

The major European markets also moved to the upside on the day. While the U.K.’s FTSE 100 Index rose by 0.4 percent, the German DAX Index and the French CAC 40 Index surged by 2.2 percent and 2.3 percent, respectively.

In the bond market, treasuries extending the notable rebound seen in the previous session. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, is down by 7.7 basis points at 3.716 percent.

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