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U.S. Stocks Extending Yesterday's Modest Pullback


Stocks have moved slightly lower over the course of morning trading on Wednesday, extending the modest drop seen in the previous session. The major averages are pulling back further off the record closing highs set on Monday.

Currently, the major averages remain stuck below the unchanged line. The Dow is down 23.45 points or 0.1 percent at 27,312.18, the Nasdaq is down 7.52 points or 0.1 percent at 8,215.28 and the S&P 500 is down 6.66 points or 0.2 percent at 2,997.38.

The modest weakness on Wall Street may partly reflected renewed uncertainty about the near-term outlook for interest rates following the release of disappointing housing data.

Before the start of trading, the Commerce Department released a report showing a bigger than expected drop in housing starts as well as a nosedive in building permits.

The Commerce Department said housing starts slid by 0.9 percent to an annual rate of 1.253 million in June after slipping by 0.4 percent to a revised rate of 1.265 million in May.

Economists had expected housing starts to fall by 0.6 percent to a rate of 1.261 million from the 1.269 million originally reported for the previous month.

The report also unexpectedly showed a substantial pullback in building permits, an indicator of future housing demand.

Building permits plunged by 6.1 percent to an annual rate of 1.220 million in June after climbing by 0.7 percent to a revised rate of 1.299 million in May.

Economists had expected building permits to rise by 0.5 percent to a rate of 1.300 million from the 1.294 million originally reported for the previous month.

With the much steeper than expected drop, building permits fell to their lowest level since hitting a rate of 1.201 million in May of 2017.

Trading activity has remained somewhat subdued, however, as traders stick to the sidelines as they wait for the earnings season to pick up steam being making more significant bets.

Shares of Bank of America (BAC) have moved moderately higher after financial giant reported second quarter results that beat analyst estimates on both the top and bottom lines.

On the other hand, shares of United Airlines (UAL) have edged lower even though airline reported better than expected second quarter results.

Traders may be looking ahead to the release of results from companies like IBM Corp. (IBM), eBay (EBAY), and Netflix (NFLX) after the close of trading.

Honeywell (HON), Morgan Stanley (MS), UnitedHealth (UNH), Microsoft (MSFT), Capital One (COF), and American Express (AXP) are also among the companies due to report their quarterly results in the coming days.

After moving sharply higher in the previous session, transportation stocks have shown a substantial move back to the downside. The Dow Jones Transportation Average is plunging by 2.9 percent after jumping 1.8 percent to a two-month closing high on Tuesday.

CSX Corp. (CSX) is leading the sector lower after the rail operator reported weaker than expected second quarter earnings and slashed its full-year revenue forecast.

Oil service stocks are also seeing considerable weakness in morning trading, dragging the Philadelphia Oil Service Index down by 1.5 percent.

Steel and natural gas stocks have also moved to the downside, while gold stocks have moved notably higher along with the price of the precious metal.

In overseas trading, stock markets across the Asia-Pacific region moved mostly lower during trading on Wednesday. Japan's Nikkei 225 Index fell by 0.3 percent, while China's Shanghai Composite Index dipped by 0.2 percent.

The major European markets have also moved to the downside on the day. While the German DAX Index has slid by 0.6 percent, the French CAC 40 Index and the U.K.'s FTSE 100 Index are both down by 0.5 percent.

In the bond market, treasuries have moved back to the upside following the pullback seen in the previous session. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, is down by 3.5 basis points at 2.087 percent.

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