U.S. Stocks Give Back Ground But Close Well Off Worst Levels

After a positive start to the week, stocks gave back ground over the course of the trading session on Wednesday. The major averages fluctuated early in the session but slid more firmly into negative territory as the day progressed.

The major averages climbed well off their worst levels late in the session but remained in the red. The Dow dipped 99.99 points or 0.3 percent to 30,423.81, the Nasdaq slid 91.89 points or 0.9 percent to 10,680.51 and the S&P 500 fell 24.82 points or 0.7 percent to 3,695.16.

Profit taking contributed to the pullback on Wall Street, as traders cashed in on the strong gains posted on Monday and Tuesday.

The major averages ended Tuesday’s trading well off their highs of the session, although the Dow still reached its best closing level in almost a month.

Lingering concerns about higher interest rates and the impact on the global economy also continued to weigh on the markets along with a jump in treasury yields.

The yield on the benchmark ten-year note moved sharply higher following a modest pullback on Tuesday, reaching its highest levels in fourteen years.

“Markets expect the Fed to deliver another 75 basis point increase in November and the odds are rising that they could do that again in December,” said Edward Moya, senior market analyst at OANDA.

However, stocks regained some ground following the release of the Federal Reserve’s Beige Book, a compilation of anecdotal evidence on economic conditions in each of the twelve Fed districts.

The Beige Book said economic activity in the U.S. has expanded modestly since early September, although the report noted conditions varied across industries and districts.

The Fed said four districts saw flat activity and two cited declines, with slowing or weak demand attributed to higher interest rates, inflation, and supply disruptions.

With regard to inflation, the Beige Book noted price growth remained elevated but acknowledged some easing across several districts.

The weakness on Wall Street came despite a notable advance by shares of Netflix (NFLX), with the streaming giant surging by 13.1 percent.

The spike by Netflix came after the company reported third quarter earnings and revenue that beat analyst estimates on strong subscriber growth.

Dow components Procter & Gamble (PG) and Travelers (TRV) also moved to the upside after reporting better than expected quarterly results.

Sector News

Housing stocks moved sharply lower over the course of the session, dragging the Philadelphia Housing Sector Index down by 4.5 percent.

The sell-off by housing stocks came after the Commerce Department released a report showing housing starts tumbled by more than expected in the month of September.

Substantial weakness also emerged among banking stocks, as reflected by the 3.6 percent nosedive by the KBW Bank Index.

Biotechnology stocks also showed a significant move to the downside on the day, resulting in a 3.4 percent plunge by the NYSE Arca Biotechnology Index.

Gold, commercial real estate and pharmaceutical stocks also saw considerable weakness, while energy stocks bucked the downtrend amid a sharp increase by the price of crude oil.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region turned in a mixed performance during trading on Wednesday. Japan’s Nikkei 225 Index rose by 0.4 percent, while China’s Shanghai Composite Index slumped by 1.2 percent.

Meanwhile, European stocks showed a lack of direction over the course of the session before closing modestly lower. While the French CAC 40 Index fell by 0.4 percent, the U.K.’s FTSE 100 Index and the German DAX Index both edged down by 0.2 percent.

In the bond market, treasuries pulled back sharply after ending the previous session modestly higher. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, jumped 12.9 basis points to a new fourteen-year closing high 4.127 percent.

Looking Ahead

Trading on Thursday may be impacted by reaction to reports on weekly jobless claims, existing home sales and leading economic indicators.

On the earnings front, IBM Corp. (IBM), Tesla (TSLA) and Alcoa (AA) are among the companies releasing their quarterly results after the close of today’s trading.

American Airlines (AAL), AT&T (T), Dow (DOW) and Nokia (NOK) are also among the companies due to report their results before the start of trading on Thursday.

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