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Stocks Extending Yesterday's Volatile Performance - U.S. Commentary


Extending the volatile performance seen in the previous session, stocks have fluctuated over the course of the trading day on Tuesday. The major averages have spent the day bouncing back and forth across the unchanged line.

Currently, the major averages are all in positive territory. The Dow is up 28.40 points or 0.1 percent at 26,515.18, the Nasdaq is up 42.46 points or 0.6 percent at 7,778.41 and the S&P 500 is up 6.42 points or 0.2 percent at 2,890.85.

The choppy trading on Wall Street comes as traders are keeping an eye on treasuries amid renewed concerns about the outlook for interest rates.

Treasuries have shown a lack of direction on the day as the bond markets re-opened following the Columbus Day holiday on Monday.

After an initial move to the upside, treasury yields turned lower early in the session before climbing back near the unchanged line.

Recent upbeat economic data pushed the yield on the benchmark ten-year note to its highest levels in over seven year last Friday.

Meanwhile, traders have largely shrugged off news the International Monetary Fund has lowered its forecast for U.S. and Chinese economic growth.

Citing the "negative effect of recent tariff actions," the IMF said economic growth in the U.S. and China is now expected to slow to 2.5 percent and 6.2 percent, respectively, next year.

Overall trading activity is somewhat subdued, as a lack of major U.S. economic data is keeping some traders on the sidelines following the holiday on Monday.

In the coming days, traders are likely to keep a close eye on reports on producer and consumer prices as well as comments by several Federal Reserve officials.

Sector News

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

Tobacco stocks are seeing substantial strength, however, with the sector extending the rally seen in the previous session. The NYSE Arca Tobacco Index is jumping by 5.7 percent after reaching a record intraday high earlier in the day.

Notable strength is also visible among energy stocks, which are moving higher along with the price of crude oil. Crude for November delivery is climbing $0.53 to $74.82 a barrel.

On the other hand, significant weakness is visible among chemical stocks, as reflected by the 2.2 percent slump by the S&P Chemical Sector Index. The index has fallen to its lowest intraday level in over two months.

PPG Industries (PPG) has led the chemical sector lower after warning of weaker than expected third quarter results due in part to higher raw material and logistics costs.

Gold stocks have also moved to the downside on the day, with the NYSE Arca Gold Bugs Index falling by 1.2 percent despite an increase by the price of the precious metal.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved mostly lower during trading on Tuesday. Japan's Nikkei 225 Index tumbled by 1.3 percent, while Hong Kong's Hang Seng Index dipped by 0.1 percent.

Meanwhile, the major European markets moved higher over the course of the session. While the U.K.'s FTSE 100 Index inched up by 0.1 percent, the German DAX Index and the French CAC 40 Index rose by 0.3 percent and 0.4 percent, respectively.

In the bond market, treasuries have climbed back near the unchanged line after seeing initial weakness. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, is down by less than a basis point at 3.220 percent.

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