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U.S. Stocks Pull Back Near Unchanged Line After Seeing Initial Strength

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After failing to sustain an initial move to the upside, stocks have given back ground over the course of the trading session on Tuesday. The major averages have pulled back near the unchanged line after reaching their best intraday levels in a month.

Currently, the major averages are posting modest gains. The Dow is up 32.89 points or 0.1 percent at 26,095.57, the Nasdaq is up 5.40 points or 0.1 percent at 7,828.57 and the S&P 500 is up 3.12 points or 0.1 percent at 2,889.85.

The initial strength on Wall Street partly reflected recent upward momentum, which has helped stocks bounce well off the multi-month lows set last month.

Optimism about a potential interest rate cut by the Federal Reserve has contributed to the recent rebound on Wall Street, with the central bank due to make its latest monetary policy decision next week.

The Fed is widely expected to leave interest rates unchanged next week, although the chances for a rate cut next month have spiked since Fed Chairman Jerome Powell pledged to act "as appropriate" to support the economic expansion.

Buying interest waned shortly after the start of trading, however, inspiring some traders to cash in on the recent strength in the markets.

On the U.S. economic front, the Labor Department said its producer price index for final demand inched up by 0.2 percent in May after rising by 0.2 percent in April. The uptick in prices matched economist estimates.

Excluding food and energy prices, core producer prices rose by 0.2 percent in May after edging up by 0.1 percent in the previous month. The increase in core prices also met expectations.

The report also said the annual rate of growth in producer prices slowed to 1.8 percent from 2.2 percent in April, coming in below estimates for an increase of 2.0 percent.

The annual rate of core producer price growth also dipped to 2.3 percent in May from 2.4 percent in April, matching expectations.

On Wednesday, the Labor Department is scheduled to release its more closely watched report on consumer price inflation in May.

Sector News

Despite the pullback by the broader markets, substantial strength remains visible among steel stocks. The NYSE Arca Steel Index has given back ground after reaching a one-month high but is still up by 2.8 percent.

The rally by steel stocks comes amid optimism about Chinese demand following news Beijing will allow local governments to use proceeds from special bonds as capital for major infrastructure projects.

Oil service stocks also continue to turn in a strong performance on the day, resulting in a 1.7 percent jump by the Philadelphia Oil Service Index.

On the other hand, housing stocks have come under pressure over the course of the trading session, dragging the Philadelphia Housing Sector Index down by 1.2 percent.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved mostly higher during trading on Tuesday. Japan's Nikkei 225 Index rose by 0.3 percent, while China's Shanghai Composite Index spiked by 2.6 percent.

The major European markets also moved to the upside on the day. While the German DAX Index advanced by 0.9 percent, the French CAC 40 Index climbed by 0.5 percent and the U.K.'s FTSE 100 Index rose by 0.3 percent.

In the bond market, treasuries have climbed off their worst levels but continue to see modest weakness. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, is up by 1.1 basis points at 2.154 percent.

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