Major Averages Pull Back Near Unchanged Line After Initial Upward Move

Stocks moved to the upside at the start of trading on Wednesday but have given back ground over the course of the morning. The major averages have pulled back off their early highs and are now lingering near the unchanged line.

Currently, the major averages are narrowly mixed. While the S&P 500 is up 4.42 points or 0.1 percent at 3,828.56, the Dow is down 11.25 points or less than a tenth of a percent at 33,125.12 and the Nasdaq is down 9.07 points or 0.1 percent at 10,377.92.

The initial upward move came as stocks benefited from strength in overseas markets, which moved higher following encouraging European inflation data and indications the latest Covid wave in China may have peaked.

Buying interest waned shortly after the start of trading, however, as traders continue to express concerns about the outlook for interest rates and the economy.

Adding to the economic worries, 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.

The choppy trading seen since then 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.

Despite the pullback by the broader markets, gold stocks continue to see significant strength, resulting in a 3.6 percent surge by the NYSE Arca Gold Bugs Index.

The rally by gold stocks comes amid an increase by the price of the precious metal, with gold for February delivery climbing $11.60 to $1,857.70 an ounce.

Considerable strength also remains visible among airline stocks, as reflected by the 3.3 percent spike by the NYSE Arca Airline Index.

Banking, commercial real estate and computer hardware stocks are also seeing continued strength, while software stocks have come under pressure.

A steep drop by shares of Microsoft (MSFT) is weighing on the software sector, with the tech giant plunging by 5.3 percent after UBS downgraded its rating on the company’s stock to Neutral from Buy.

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 have also moved to the upside on the day. While the U.K.’s FTSE 100 Index is up by 0.2 percent, the German DAX Index is up by 1.8 percent and the French CAC 40 Index is up by 2.1 percent.

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 8.2 basis points at 3.711 percent.

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