U.S. Stocks Remain Firmly Positive After Early Rally

After showing a strong move to the upside early in the session, stocks continue to turn in a strong performance in afternoon trading on Tuesday. The major averages are extending the rally seen over the two previous sessions.

The major averages have pulled back off their best levels in recent trading but remain firmly positive. The Dow is up 199.34 points or 0.6 percent at 31,698.96, the Nasdaq is up 173.16 points or 1.6 percent at 11,125.77 and the S&P 500 is up 40.82 points or 1.1 percent at 3,838.16.

The extended rally on Wall Street comes amid a sharp pullback by treasury yields, with the yield on the benchmark ten-year note showing a steep drop after ending the previous session at a fourteen-year closing high.

The pullback by treasury yields comes as traders continue to express optimism the Federal Reserve will signal a slower pace of interest rate hikes following its meeting next week.

The Fed is widely expected to raise interest rates by another 75 basis points next week, although CME Group’s FedWatch Tool shows the chances for a 50 or 75 basis point rate hike in December are split roughly fifty-fifty.

While public comments from Fed officials have largely been hawkish, a recent report from the Wall Street Journal suggested some are growing uneasy about the impact the aggressive rate hikes are having on the economy.

The markets are also benefiting from a positive reaction to the latest earnings news, with General Motors (GM) and Coca-Cola (KO) posting strong gains after reporting better than expected third quarter earnings.

On the other hand, shares of 3M (MMM) are seeing modest weakness after the conglomerate reported mixed third quarter results and lowered its full-year guidance.

Traders may also be expressing optimism about the upcoming release of quarterly results from several tech giants, with Alphabet (GOOGL) and Microsoft (MSFT) reporting their results after the close of trading.

Sector News

Interest rate sensitive commercial real estate stocks continue to turn in some of market’s best performances, with the Dow Jones U.S. Real Estate Index spiking by 3.5 percent.

Optimism about the Fed slowing the pace of rate hikes has also contributed to substantial strength among housing stocks, as reflected by the 3.3 percent surge by the Philadelphia Housing Sector Index.

Networking stocks also continue to see considerable strength on the day, driving the NYSE Arca Networking Index up by 2.4 percent to its best intraday level in over a month.

Tobacco, computer hardware, chemical and telecom stocks have also moved notably higher, reflecting broad based buying interest.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region turned in a mixed performance during trading on Tuesday. Japan’s Nikkei 225 Index shot up by 1.0 percent, while China’s Shanghai Composite Index closed just below the unchanged line.

Meanwhile, European stocks moved mostly higher on the day. While the U.K.’s FTSE 100 Index ended the day nearly unchanged, the German DAX Index advanced by 0.9 percent and the French CAC 40 Index surged by 1.9 percent.

In the bond market, treasuries have given back some ground after an early rally but remain sharply higher. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, is down by 13.0 basis points at 4.104 percent.

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