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Major Averages Close Nearly Flat Following Afternoon Pullback - U.S. Commentary


After showing a notable move to the upside in morning trading on Tuesday, stocks gave back ground over the course of the afternoon. The major averages pulled back well off their highs of the session before ending the day roughly flat.

The major averages finished the session on opposite sides of the unchanged line. While the Nasdaq inched up 9.47 points or 0.1 percent to 7,723.95, the Dow slipped 26.72 points or 0.1 percent to 25,887.38 and the S&P 500 edged down 0.37 point or less than a tenth of a percent to 2,832.57.

The early strength on Wall Street partly reflected continued optimism about U.S.-China trade talks, which has contributed to a recent upward trend on Wall Street.

However, the positive sentiment was partly offset after a report from Bloomberg said U.S. negotiators are concerned that China is pushing back against American demands.

Two people familiar with the negotiations told Bloomberg that Chinese officials have shifted their stance because they haven't received assurances from the Trump administration that tariffs on Chinese exports will be lifted.

The Bloomberg report seems in conflict with a separate Dow Jones report that the trade talks are in the final stages, with U.S. Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin set to fly to Beijing next week.

The roughly flat close by the major averages also came as traders looked ahead to the announcement of the Federal Reserve's latest monetary policy decision on Wednesday.

The Fed is widely expected to leave interest rates unchanged, although traders are likely to keep a close eye on the accompanying statement for clues about the outlook for rates.

The central bank's economic projections and Fed Chairman Jerome Powell's subsequent press conference are also likely to be in focus.

Traders largely shrugged off a report from the Commerce Department showing new orders for U.S. manufactured goods edged only slightly higher in the month of January.

The Commerce Department said factory orders inched up by 0.1 percent in January, matching the 0.1 percent uptick in December. Economists had expected orders to rise by 0.3 percent.

Sector News

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

Transportation stocks showed a significant move to the downside, however, with the Dow Jones Transportation Average falling by 1.3 percent.

Considerable weakness also emerged among financial stocks, dragging the KBW Bank Index and the NYSE Arca Broker/Dealer Index down by 1.3 percent and 1 percent, respectively.

On the other hand, semiconductor stocks turned in a strong performance on the day, driving the Philadelphia Semiconductor Index up by 1.3 percent to a six-month closing high.

Other Markets

In overseas trading, most stock markets across the Asia-Pacific region moved modestly lower during trading on Tuesday. Japan's Nikkei 2225 Index edged down by 0.1 percent, while China's Shanghai Composite Index dipped by 0.2 percent.

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

In the bond market, treasuries extended the modest pullback seen in the previous session. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, inched up by 1.2 basis points to 2.614 percent.

Looking Ahead

The Fed's statement and projections as well as Powell's accompanying press conference are likely to be in the spotlight on Wednesday amid an otherwise quiet day on the U.S. economic front.

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