Stocks moved back to the downside in early trading on Tuesday but have shown a significant turnaround over the course of the session. The major averages have bounced well off their early lows and into positive territory.
Currently, the major averages are just off their highs of the session. The Dow is up 95.06 points or 0.3 percent at 33,024.02, the Nasdaq is up 50.99 points or 0.4 percent at 12,840.47 and the S&P 500 is up 23.11 points or 0.6 percent at 4,189.93.
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 have shown a substantial rebound on the day, with the NYSE Arca Networking Index surging by 3.2 percent after tumbling to its lowest closing level in well over a year on Monday.
Arista Networks (ANET) is leading 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 remains visible among housing stocks, as reflected by the 1.7 percent gain being posted by the Philadelphia Housing Sector Index.
Commercial real estate, telecom and semiconductor stocks are also seeing notable strength in afternoon trading, while gold and airline stocks have come under pressure over the course of the session.
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 have 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, is down by less than a basis point at 4.867 percent.
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