U.S. Stocks Give Back Ground After Early Move To The Upside

After moving to the upside early in the session, stocks have given back ground over the course of the trading day on Tuesday. The major averages have pulled back off their highs of the session and are now lingering near the unchanged line.

Currently, the major averages are posting modest gains. The Dow is up 15.87 points or less than a tenth of a percent at 44,417.80, the Nasdaq is up 33.60 points or 0.2 percent at 19,770.29 and the S&P 500 is up 3.01 points or 0.1 percent at 6,055.86.

Stocks may initially have benefitted from bargain hunting following the weakness seen in the previous session, but buying interest waned shortly after the start of trading.

Traders may be reluctant to make significant moves ahead of the release of the Labor Department’s closely watched report on consumer price inflation on Wednesday.

The report is expected to show consumer prices rose by 0.2 percent for the fifth straight month in November, while the annual rate of consumer price growth is expected to tick up to 2.7 percent in November from 2.6 percent in October.

Core consumer prices, which exclude food and energy prices, are expected to increase by 0.3 percent for the fourth straight month in November. The annual rate of growth by core consumer prices is expected to remain at 3.3 percent.

While the Federal Reserve is widely expected to lower rates by another 25 basis points next week, the data could impact the outlook for future rate cuts by the central bank.

CME Group’s FedWatch Tool is currently indicating an 88.0 percent chance the Fed will lower rates by a quarter point next week but a 71.8 percent chance the central bank will then leave rates unchanged in late January.

Sector News

Computer hardware stocks have moved sharply lower on the day, with the NYSE Arca Computer Hardware Index plunging by 3.6 percent after ending Monday’s trading at a nearly five-month closing high.

Significant weakness is also visible among semiconductor stocks, as reflected by the 1.5 percent loss being posted by the Philadelphia Semiconductor Index.

Housing stocks are also seeing considerable weakness on the day, dragging the Philadelphia Housing Sector Index down by 1.5 percent.

Homebuilder Toll Brothers (TOL) is leading the sector lower after reporting fiscal fourth quarter earnings and revenues that beat estimates but weaker than expected unadjusted homebuilding gross margin.

On the other hand airline stocks have shown a strong move to the upside, driving the NYSE Arca Airline Index up by 2.3 percent. Alaska Air Group (ALK) is soaring by 14.8 percent after raising its fourth quarter profit forecast.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region turned in a mixed performance during trading on Tuesday. While Japan’s Nikkei 225 Index rose by 0.5 percent, Hong Kong’s Hang Seng Index fell by 0.5 percent.

Meanwhile, European stocks have moved mostly lower on the day. The French CAC 40 Index is down by 1.0 percent and the U.K.’s FTSE 100 Index is down by 0.8 percent, although the German DAX Index has bucked the downtrend and inched up by 0.1 percent.

In the bond market, treasuries are extending the pullback seen in the previous session. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, is up by 3.7 basis points at 4.236 percent.

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