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Major Averages Close Mixed Following Volatile Session - U.S. Commentary

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After failing to sustain an initial upward move, stocks showed a lack of direction over the course of the trading session on Tuesday. The major averages pulled back off their early highs and spent the rest of the day bouncing back and forth across the unchanged line.

Eventually, the major averages ended the day mixed. While the tech-heavy Nasdaq rose 11.31 points or 0.2 percent to 7,031.83, the Dow dipped 53.02 points or 0.2 percent to 24,370.24 and the S&P 500 edged down 0.94 points or less than a tenth of a percent to 2,636.78.

The volatility on the day came as traders waffled between optimism and skepticism about a potential trade agreement between the U.S. and China.

Renewed optimism about U.S.-China trade talks contributed to the initial strength on Wall Street after a telephone call between top officials from the world's two largest economies.

China's Commerce Ministry said Chinese Vice Premier Liu He spoke with U.S. Treasury Secretary Steven Mnuchin and U.S. Trade Representative Robert Lighthizer.

"Both sides exchanged views on putting into effect the consensus reached by the two countries' leaders at their meeting, and pushing forward the timetable and roadmap for the next stage of economic and trade consultations work," the ministry said in a statement.

A report from Bloomberg News that China is moving toward cutting tariffs on imported U.S.-made cars added to the positive sentiment.

Citing people familiar with the matter, Bloomberg said a proposal to reduce tariffs on cars made in the U.S. to 15 percent from the current 40 percent has been submitted to China's Cabinet.

Just after his meeting with Xi, Trump claimed in a post on Twitter that China had agreed to reduce and remove tariffs on cars coming into China from the U.S.

However, skepticism resurfaced after a report from the Washington Post said the Trump administration is preparing a series of actions this week to call out China for allegedly stealing U.S. trade secrets and technologies.

Citing U.S. officials, the Washington Post said multiple government agencies would condemn China, with the Justice Department expected to announce the indictments of multiple hackers suspected of working for a Chinese intelligence service.

A testy public exchange between Trump and top Democratic leaders over funding for his proposed border wall may have also raised concerns about a partial government shutdown.

Meanwhile, traders largely shrugged off a report from the Labor Department unexpectedly showing a modest uptick in producer prices in the month of November.

The Labor Department said its producer price index for final demand inched up by 0.1 percent in November after climbing by 0.6 percent in October. Economists had expected prices to be unchanged.

Excluding food and energy prices, core producer prices rose by 0.3 percent in November following a 0.5 percent increase in October. Core prices had been expected to edge up by 0.1 percent.

Sector News

Most of the major sectors ended the day showing only modest moves, contributing to the lackluster close by the broader markets.

Oil service stocks saw notable weakness, however, with the Philadelphia Oil Service Index falling by 1.5 percent to its lowest closing level in nearly fifteen years.

The weakness among oil service stocks came despite an increase by the price of crude oil, as crude for January delivery climbed $0.65 to $51.65 a barrel.

Banking and housing stocks also saw notable weakness on the day, while some strength remained visible among semiconductor and networking stocks.

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 fell by 0.3 percent, while Hong Kong's Hang Seng Index crept up by 0.1 percent.

Meanwhile, the major European markets all showed strong moves to the upside on the day. While the German DAX Index surged up by 1.5 percent, the French CAC 40 Index and the U.K.'s FTSE 100 Index jumped by 1.4 percent and 1.3 percent, respectively.

In the bond market, treasuries fluctuated over the course of the session before closing modestly lower. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, rose by 2.3 basis points to 2.879 percent.

Looking Ahead

On Wednesday, the Labor Department is scheduled to release a separate report on consumer prices in the month of November.

Consumer prices are expected to come in unchanged during the month, while core consumer prices are expected to rise by 0.2 percent.

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