U.S. Stocks Pull Back Well Off Best Levels But Close Mostly Higher

After showing a substantial move to the upside in early trading on Tuesday, stocks gave back ground over the course of the trading session but managed to close mostly higher.

The tech-heavy Nasdaq jumped 162.19 points or 1.5 percent to a nearly two-month closing high of 11,358.41 percent, while the S&P 500 advanced 34.48 points or 0.9 percent to 3,991.73.

Meanwhile, the narrower Dow inched up 56.22 points or 0.2 percent to 33,592.92 after surging 450 points in early trading to its best intraday level in almost three months.

The early rally on Wall Street came following the release of a Labor Department report showing producer prices in the U.S. crept up by much less than expected in the month of October.

The Labor Department said its producer price index for final demand inched up by 0.2 percent in October, matching a revised uptick in September.

Economists expected producer prices to climb by 0.5 percent compared to the 0.4 percent increase originally reported for the previous month.

The report also showed the annual rate of producer price growth slowed to 8.0 percent in October from 8.4 percent in September. The year-over-year growth was expected to edge down to 8.3 percent.

Following last week’s tamer-than-expected consumer price inflation report, the data added to optimism about the Federal Reserve slowing the pace of interest rate hikes as soon as next month.

“It’s premature to conclude a dovish Fed pivot is on the way, though Vice Chair Lael Brainard’s comments yesterday, on top of downside surprises in both October CPI and PPI reports, raise the odds,” said Will Compernolle, Senior Economist at FHN Financial.

CME Group’s FedWatch Tool is currently indicating an 80.6 percent chance the Fed will raise rates by 50 basis points next month and a 19.4 percent chance of another 75 basis point rate hike.

The strength on Wall Street also came amid a surge by shares of Walmart (WMT), with the retail giant spiking by 6.5 percent.

The jump by Walmart came after the company reported better than expected third quarter results and announced a $20 billion share buyback.

However, stocks pulled back well off their best levels of the day following reports Russian missiles crossed into Poland, killing two people.

Sector News

Semiconductor stocks turned in some of the market’s best performances on the day, with the Philadelphia Semiconductor Index spiking by 3.0 percent to its best closing level in well over two months.

Taiwan Semiconductor (TSM) posted a standout gain on news Warren Buffett’s Berkshire Hathaway has bought more than $4.1 billion of the chipmaker’s stock.

Significant strength also remained visible among housing stocks, as reflected by the 2.0 percent surge by the Philadelphia Housing Sector Index.

Retail stocks also saw considerable strength following the upbeat earnings news from Walmart, driving the Dow Jones U.S. Retail Index up by 1.9 percent

Energy, airline and brokerage stocks also showed notable moves to the upside, although most sectors closed well off their best levels of the day.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved mostly higher during trading on Tuesday. Japan’s Nikkei 225 Index inched up by 0.1 percent, while China’s Shanghai Composite Index jumped by 1.6 percent and Hong Kong’s Hang Seng Index spiked by 4.1 percent.

Meanwhile, the major European markets turned in a mixed performance on the day. While the U.K.’s FTSE 100 Index edged down by 0.2 percent, the German DAX Index and the French CAC 40 Index both rose by 0.5 percent.

In the bond market, treasuries fluctuated after an early rally but managed to close firmly in positive territory. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, slid 6.6 basis points to one-month closing low of 3.799 percent.

Looking Ahead

Trading on Wednesday may be impacted by reaction to a slew of U.S. economic data, including reports on retail sales, import and export prices and industrial production.

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