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Stocks Giving Back Ground After Yesterday's Rally - U.S. Commentary

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Stocks have moved mostly lower in morning trading on Tuesday, giving back ground following the strong upward move seen in the previous session. The major averages have all moved to the downside, although selling pressure has remained relatively subdued.

Currently, the major averages remain firmly in negative territory. The Dow is down 146.11 points or 0.6 percent at 25,680.32, the Nasdaq is down 44.72 points or 0.6 percent at 7,396.79 and the S&P 500 is down 16.08 points or 0.6 percent at 2,774.29.

The pullback on Wall Street is partly due to profit taking following the strong gains posted on Monday in reaction to the trade war truce reached by President Donald Trump and Chinese President Xi Jinping.

Uncertainty about whether the 90-day truce will give the U.S. and China enough time to reach a long-term trade agreement may inspire traders to cash in on yesterday's strong upward move.

News that U.S. Trade Representative Robert Lighthizer, one of Trump's more hawkish advisors on trade with China, has been tapped to lead the negotiations has added to the skepticism.

Trump has appeared optimistic about the potential for an agreement, claiming U.S. relations with China have taken a "big lead forward" as a result of his meeting with XI.

"Very good things will happen," Trump said in a post on Twitter. "We are dealing from great strength, but China likewise has much to gain if and when a deal is completed. Level the field!"

"President Xi and I have a very strong and personal relationship," he added. "He and I are the only two people that can bring about massive and very positive change, on trade and far beyond, between our two great Nations."

Overall trading activity is be somewhat subdued, however, with a lack of major U.S. economic data keeping some traders on the sidelines.

Tomorrow's national day of mourning for former President George H.W. Bush may also be limiting trading activity, as the NYSE and the Nasdaq will be closed on the day and the release of most economic data has been postponed.

Transportation stocks are turning in some of the market's worst performances on the day, dragging the Dow Jones Transportation Average down by 2.9 percent. The average is pulling back after ending the previous session at its best closing level in nearly two months.

With the transportation sector, delivery giants UPS (UPS) and FedEx (FDX) are posting substantial losses along with trucking company Ryder (R).

Significant weakness is also visible among financial stocks, with the KBW Bank Index and the NYSE Arca Broker/Dealer Index falling by 2.7 percent and 1.9 percent, respectively.

Housing, computer hardware, and semiconductor stocks are also seeing notable weakness, while gold stocks are bucking the downtrend amid an increase by the price of the precious metal.

In overseas trading, stock markets across the Asia-Pacific region moved mostly lower on Tuesday, although Chinese stocks bucked the downtrend. China's Shanghai Composite Index rose by 0.4 percent, while Japan's Nikkei 225 Index tumbled by 2.4 percent.

Meanwhile, the major European markets have all moved to the downside on the day. While the German DAX Index has slumped by 1 percent, the French CAC 40 Index is up by 0.8 percent and the U.K.'s FTSE 100 Index is down by 0.5 percent.

In the bond market, treasuries are extending the upward move seen over the course of the previous session. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, is down by 3.9 basis points at 2.953 percent.

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