U.S. Stocks Pull Back Off Early Highs But Remain Firmly Positive

After showing a strong move to the upside early in the session, stocks have given back some ground over the course of morning trading on Tuesday. The major averages have pulled back off their highs of the session but remain firmly in positive territory.

The major averages have moved roughly sideways in recent trading, holding on to gains. The Dow is up 201.10 points or 0.6 percent at 32,445.68, the Nasdaq is up 61.76 points or 0.5 percent at 11,737.30 and the S&P 500 is up 25.69 points or 0.7 percent at 3,977.26.

The early rally on Wall Street partly reflected easing concerns about turmoil in the financial sector following recent steps taken to rescue distressed banks in the U.S. and Europe.

Positive sentiment was also generated in reaction to remarks by Treasury Secretary Janet Yellen, who said the government is prepared to once again take action to protect bank depositors if smaller lenders are threatened.

In remarks prepared to the American Bankers Association, Yellen addressed recent steps taken to protect depositors following the failures of Silicon Valley Bank and Signature Bank.

“The steps we took were not focused on aiding specific banks or classes of banks. Our intervention was necessary to protect the broader U.S. banking system,” Yellen said.

She continued, “And similar actions could be warranted if smaller institutions suffer deposit runs that pose the risk of contagion.”

Buying interest has waned somewhat since then, however, as traders look ahead to the Federal Reserve’s highly anticipated monetary policy announcement on Wednesday.

While the recent banking turmoil led to some speculation the Fed may leave interest rates unchanged, CME Group’s FedWatch Tool is currently indicating an 80.5 percent chance of a 25 basis point rate hike.

Sector News

Banking stocks are turning in some of the market’s best performances on the day, driving the KBW Bank Index up by 4.5 percent. The index continues to regain ground after ending last Friday’s trading at its lowest closing level in well over two years.

Substantial strength is also visible among oil service stocks, as reflected by the 3.0 percent surge by the Philadelphia Oil Service Index.

The rally by oil service stocks comes as crude oil for April delivery is jumping $1.11 to $68.75 a barrel, extending the rebound seen in the previous session.

Brokerage stocks are also seeing considerable strength on the day, resulting in a 2.4 percent jump by the NYSE Arca Broker/Dealer Index.

Airline, housing and steel stocks have also moved notably higher, while gold and utility stocks have come under pressure.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved mostly higher on Tuesday, with the Japanese markets closed for a holiday. China’s Shanghai Composite Index climbed by 0.6 percent, while Hong Kong’s Hang Seng Index surged by 1.4 percent.

The major European markets have also shown strong moves to the upside on the day. While the German DAX Index is up by 1.8 percent, the U.K.’s FTSE 100 Index is up by 1.7 percent and the French CAC 40 Index is up by 1.5 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 6.4 basis points at 3.545 percent.