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Major Averages Close Mixed After Seeing Initial Weakness - U.S. Commentary

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After initially moving to the downside, stocks fluctuated over the course of the trading session on Wednesday. While the major averages all climbed well off their worst levels of the day, only the Nasdaq managed to close in positive territory.

The major averages subsequently turned in a mixed performance on the day. The Nasdaq rose 24.64 points or 0.3 percent to 7,396.65, but the Dow fell 82.76 points or 0.3 percent to 24,801.36 and the S&P 500 edged down 1.32 points or 0.1 percent to 2,726.80.

The mixed close on Wall Street came after White House Press Secretary Sarah Sanders suggested Mexico and Canada could be exempt from President Donald Trump's planned tariffs on steel and aluminum imports.

"We expect that the President will sign something by the end of the week," Sanders said. "And there are potential carve-outs for Mexico and Canada based on national security and possibly other countries as well based on that process."

She added, "That will be a case by case and country by country basis. It would be determined whether or not there is a national security exemption."

Stocks initially came under pressure in reaction to news of the resignation of White House chief economic advisor Gary Cohn on Tuesday.

The resignation by Cohn, a free trade advocate, reportedly came amid a dispute over Trump's plans to impose tariffs on steel and aluminum imports.

In a statement, Trump said Cohn did a "superb job in driving our agenda, helping to deliver historic tax cuts and reforms and unleashing the American economy once again."

Trump said in a post on Twitter that he would make a decision on a new chief economic advisor "soon," adding, "Many people wanting the job - will choose wisely!"

In U.S. economic news, payroll processor ADP released a report showing private sector employment increased by more than expected in the month of February.

ADP said employment in the private sector jumped by 235,000 jobs in February after surging up by a revised 244,000 jobs in January. Economists had expected an increase of about 195,000 jobs.

A separate report from the Commerce Department showed the trade deficit widened by more than expected in the month of January.

The report said the trade deficit widened to $56.6 billion in January from $53.9 billion in December, reaching its highest level since October of 2008. The deficit had been expected to widen to $55.1 billion.

Later in the day, the Federal Reserve released its Beige Book, which reinforced expectations the central bank will raise interest rates at its monetary policy meeting later this month.

The Beige Book, a compilation of anecdotal evidence on economic conditions in the twelve Fed districts, said economic activity expanded at a modest to moderate pace in January and February.

The Fed noted wage growth picked up to a moderate pace, with employers raising wages and expanding benefit packages in response to tight labor market conditions.

With regard to overall inflation, the Fed said price increases were seen in all twelve districts and most reports noted moderate inflation.

Sector News

Most of the major sectors ended the day showing only modest moves, although considerable weakness was visible among gold stocks.

Reflecting the weakness in the gold sector, the NYSE Arca Gold Bugs Index slumped by 2.5 percent after jumping by 2 percent in the previous session.

The pullback by gold stocks came amid a decrease by the price of the precious metal, with gold for April delivery sliding $7.60 to $1,327.60 an ounce.

Energy stocks also saw significant weakness, moving lower along with the price of crude oil. Crude for April delivery plunged $1.45 to $61.15 a barrel.

While retail stocks also moved to the downside on the day, some strength emerged among biotechnology and real estate stocks.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved mostly lower during trading on Wednesday. Japan's Nikkei 225 Index dropped by 0.8 percent, while Hong Kong's Hang Seng Index slumped by 1 percent.

Meanwhile, the major European markets moved to the upside on the day. While the German DAX Index jumped by 1.1 percent, the French CAC 40 Index and the U.K.'s FTSE 100 Index rose by 0.3 percent and 0.2 percent, respectively.

In the bond market, treasuries turned in another lackluster performance after ending the previous session roughly flat. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, inched up by less than a basis point to 2.883 percent.

Looking Ahead

The Labor Department's weekly jobless claims report may attract attention on Thursday, although trading activity is likely to be somewhat subdued ahead of the release of the monthly jobs report on Friday.

On the earnings front, Caesars Entertainment (CZR), Costco (COST) and Rosetta Stone (RST) are among the companies releasing their quarterly results after the close of today's trading.

American Eagle (AEO), Hovnanian (HOV), Kroger (KR), and Sears (SHLD) are also among the companies due to report their results before the start of trading on Thursday.

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