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U.S. Stocks Rebound On Reports Trump Plans To Delay Auto Tariffs

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After recovering from an initial move to the downside, stocks moved mostly higher over the course of the trading session on Wednesday. With the turnaround on the day, the major averages continued to rebound from the sell-off seen on Monday.

The major averages ended the session off their best levels of the day but still firmly in positive territory. The Dow rose 115.97 points or 0.5 percent to 25,648.02, the Nasdaq jumped 87.65 points or 1.1 percent to 7,822.15 and the S&P 500 climbed 16.55 points or 0.6 percent to 2,850.96.

The strength that emerged on Wall Street reflected a positive reaction to reports President Donald Trump plans to delay imposing steep tariffs on auto imports.

Media reports indicated Trump plans to delay imposing the auto tariffs by up to six months in order to allow negotiations to continue.

Trump faces a May 18th deadline to decide whether to slap a tariff of as much as 25 percent on imported cars and parts due to national security concerns.

The turnaround by stocks in reaction to the reports reflects the markets' intense sensitivity to trade-related news in light of the escalating trade dispute between the U.S. and China.

Stocks initially came under pressure following the release of a report from the Commerce Department showing an unexpected pullback in U.S. retail sales in the month of April.

The Commerce Department said retail sales edged down by 0.2 percent in April after spiking by an upwardly revised 1.7 percent in March.

Economists had expected retail sales to rise by 0.2 percent compared to the 1.6 percent jump originally reported for the previous month.

Excluding a steep drop in auto sales, retail sales inched up by 0.1 percent in April after surging up by 1.3 percent in March, although ex-auto sales had been expected to climb by 0.7 percent.

Negative sentiment was also generated in reaction to a Federal Reserve report showing an unexpected decrease in industrial production in April.

The Fed said industrial production fell by 0.5 percent in April following a revised 0.2 percent uptick in March. Economists had expected production to come in unchanged.

Meanwhile, a separate report from the National Association of Home Builders showed homebuilder confidence has improved by much more than anticipated in the month of May.

The report said the NAHB/Wells Fargo Housing Market Index climbed to 66 in May from 63 in April, while economists had expected the index to inch up to 64.

Following declines in late 2018 due to higher interest rates and concerns over slower growth, the index has reached its highest level since October of 2018.

Sector News

Computer hardware stocks turned in some of the market's best performances on the day, driving the NYSE Arca Computer Hardware Index up by 1.6 percent.

With the advance, the index continued to rebound after ending Monday's trading at its lowest closing level in well over a month.

Significant strength also emerged among oil service stocks, as reflected by the 1.2 percent gain posted by the Philadelphia Oil Service Index. The strength in the sector came as the price of crude oil for June delivery rose $0.24 to $62.02 a barrel.

Semiconductor, retail, and software stocks also saw notable strength on the day, while some weakness was visible among financial stocks.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved mostly higher on Wednesday following recent weakness. Japan's Nikkei 225 Index rose by 0.6 percent, while China's Shanghai Composite Index spiked by 1.9 percent.

The major European markets also moved to the upside over the course of the session. While the French CAC 40 Index climbed by 0.6 percent, the U.K.'s FTSE 100 Index and the German DAX Index advanced by 0.8 percent and 0.9 percent, respectively.

In the bond market, treasuries gave back ground after an initial jump but remained firmly positive. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, fell by 4 basis points to 2.379 percent.

Looking Ahead

While trade news overshadowed today's mixed batch of U.S. economic data, trading on Thursday could be impacted by reaction to reports on weekly jobless claims, housing starts, and Philadelphia-area manufacturing activity.

Earnings news is also likely to attract attention, with Cisco Systems (CSCO) releasing its fiscal third quarter results after the close of trading and Walmart (WMT) due to release its fiscal first quarter results before the start of trading on Thursday.

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