U.S. Stocks Show Significant Recovery After Early Sell-Off

After moving sharply lower early in the session on Wednesday, stocks have shown a significant recovery over the course of the trading day. The major averages have climbed well off their lows of the session, with the tech-heavy Nasdaq climbing firmly into positive territory.

Currently, the major averages are turning in a mixed performance. While the Dow is down 180.87 points or 0.4 percent at 40,556.09, the Nasdaq is up 137.74 points or 0.8 percent at 17,163.62 and the S&P 500 is up 1.49 points or less than a tenth of a percent at 5,497.01.

The early sell-off on Wall Street came following the release of the Labor Department’s closely watched report on consumer price inflation in the month of August.

While the report showed consumer prices increased in line with economist estimates, core consumer prices rose by slightly more than expected.

The Labor Department said its consumer price index rose by 0.2 percent in August, matching the uptick seen in July as well as economist estimates.

Meanwhile, core consumer prices, which exclude food and energy prices, climbed by 0.3 percent in August after rising by 0.2 percent in July. Economists had expected core prices to rise by another 0.2 percent.

Stocks moved sharply lower as the data seemingly reduced the chances of the Federal Reserve cutting interest rates by 50 basis points next week.

Selling pressure has waned dramatically over the course session, however, as the Fed is still expected to continue lowering interest rates in the coming months.

CME Group’s FedWatch Tool suggests the chances of a half-point rate cut next week have fallen following the release of the report, but it still points to rates being at least a full percentage point lower by the end of the year.

“Given the stickiness of services inflation, the Fed will likely cut by 25 basis points in the upcoming meeting and reserve the potential for more aggressive action later this year if we have further deterioration in the job market,” said Jeffrey Roach, Chief Economist for LPL Financial.

Sector News

Despite the recovery attempt by the broader markets, interest rate-sensitive housing stocks continue to see considerable weakness, with the Philadelphia Housing Sector Index down by 1.4 percent.

Significant weakness also remains visible among banking stocks, as reflected by the 1.3 percent loss being posted by the KBW Bank Index.

Oil producer and transportation stocks also continue to see notable weakness, while semiconductor stocks have shown a significant turnaround, driving the Philadelphia Semiconductor Index up by 2.1 percent.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved mostly lower during trading on Wednesday. Japan’s Nikkei 225 Index tumbled by 1.5 percent, while China’s Shanghai Composite Index slid by 0.8 percent.

Meanwhile, the major European markets turned in a mixed performance on the day. While the German DAX Index rose by 0.4 percent, the French CAC 40 Index edged down by 0.1 percent and the U.K.’s FTSE 100 Index dipped by 0.2 percent.

In the bond market, treasuries have fluctuated over the course of the trading session. Currently, the yield on the benchmark ten-year note, which moves opposite of its price, is up by 2.6 basis points at 3.670 percent.

Business News