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Stocks Regain Ground After Seeing Initial Weakness - U.S. Commentary


After an initial move to the downside, stocks have rebounded over the course of morning trading on Monday. The major averages have bounced well off their lows of the session, climbing back near the unchanged line.

Currently, the major averages are posting modest losses on the day. The Dow is down 10.51 points or less than a tenth of a percent at 26,436.54, the Nasdaq is down 17.74 points or 0.2 percent at 7,770.71 and the S&P 500 is down 0.92 points or less than a tenth of a percent at 2,884.65.

The initial drop on Wall Street came on the heels of substantial weakness in the overseas markets, with Chinese stocks showing a particularly steep drop following a week-long holiday.

The sell-off in China came as investors brushed aside a move by the People's Bank of China to cut the reserve requirements for banks in order to lower financing costs and spur growth amid the trade war with the U.S.

Lingering concerns about the outlook for interest rates also weighed on stocks following the recent advance by treasury yields.

The yield on the ten-year note climbed to its highest closing level in over seven years last Friday on the heels of the release of the monthly jobs report.

Selling pressure waned shortly after the start of trading, however, with trader reluctant to make significant moves due to the Columbus Day holiday.

While the stock markets are open for trading, banks, federal offices, and the bond markets are all closed on the day.

The holiday has led to a lack of U.S. economic data, although reports on producer and consumer prices are likely to attract attention in the coming days along with speeches by several Federal Reserve officials.

Most of the major sectors are showing only modest moves on the day, contributing to the lackluster performance by the broader markets.

Tobacco stocks have shown a substantial move to the upside, however, with the NYSE Arca Tobacco Index spiking by 6.2 percent to a record intraday high.

On the other hand, gold stocks are seeing significant weakness in morning trading, dragging the NYSE Arca Gold Bugs Index down by 2.5 percent.

The weakness in the gold sector comes amid a steep drop by the price of the precious metal, as gold for December delivery is sliding $14.40 to $1,191.20 an ounce.

In overseas trading, stock markets across the Asia-Pacific region saw significant weakness during trading on Monday, although the Japanese markets were closed for a holiday. China's Shanghai Composite Index plummeted by 3.7 percent, while Hong Kong's Hang Seng Index tumbled by 1.4 percent.

The major European markets have also moved to the downside on the day. While the U.K.'s FTSE 100 Index has slumped by 0.9 percent, the French CAC 40 Index and the German DAX Index are both down by 1 percent.

Meanwhile, the bond markets are closed for the Columbus Day holiday following the weakness seen among treasuries over the past few sessions.

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