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

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Stocks saw moderate strength throughout morning trading on Thursday before giving back ground over the course of the afternoon. The major averages pulled back well off their highs before eventually closing mixed for the second straight day.

While the Dow dipped 52.29 points or 0.2 percent to 27,094.79, the Nasdaq inched up 5.49 points or 0.1 percent to 8,182.88 and the S&P 500 crept up 0.06 points or less than a tenth of a percent to 3,006.79.

The lackluster close on Wall Street came amid continued uncertainty about the outlook for interest rates following the Federal Reserve's monetary policy announcement on Wednesday.

The Fed lowered interest by 25 basis points as expected but indicated officials are mixed about whether the central bank should cut rates again before the end of the year.

While seven participants expect another rate cut before the end of year, five expect rates to remain unchanged and another five expect rates to be raised back to 2 to 2-1/4 percent.

The central bank reiterated that it will "act as appropriate" to sustain the economic expansion, with a strong labor market and inflation near its symmetric 2 percent objective.

CME Group's FedWatch Tool currently indicates a mixed outlook for rate cuts at the Fed's next meetings in October and December.

On the U.S. economic front, the Labor Department released a report showing a modest rebound in initial jobless claims in the week ended September 14th.

The report said initial jobless claims inched up to 208,000, an increase of 2,000 from the previous week's revised level of 206,000. Economists had expected jobless claims to climb to 213,000.

A separate report from the Philadelphia Federal Reserve showed a modest slowdown in the pace of growth in regional manufacturing activity in the month of September.

The Philly Fed said its diffusion index for current general activity fell to 12.0 in September from 16.8 in August, although a positive reading still indicates growth in regional manufacturing activity. The index had been expected to drop to 11.0.

Looking ahead, the survey's future general activity index moderated but continues to suggest growth over the next six months.

The National Association of Realtors also released a report showing an unexpected jump in existing home sales in the month of August.

NAR said existing home sales surged up by 1.3 percent to an annual rate of 5.49 million in August after spiking by 2.5 percent to a rate of 5.42 million in July.

The continued increase came as a surprise to economists, who had expected existing home sales to pull back by about 0.4 percent.

"Buyers are finding it hard to resist the current rates," said NAR chief economist Lawrence Yun. "The desire to take advantage of these promising conditions is leading more buyers to the market."

Sector News

Tobacco stocks moved sharply lower over the course of the trading session, dragging the NYSE Arca Tobacco Index down by 2.7 percent. The index tumbled to its lowest closing level in over seven months.

Significant weakness was also visible among steel stocks, as reflected by the 1.6 percent drop by the NYSE Arca Steel Index.

U.S. Steel (X) plunged by 11.1 percent after lowering its third quarter guidance due to a drop in steel prices and deteriorating market conditions in Europe.

Energy stocks also came under pressure as the price of crude oil pulled back off its early highs, while gold stocks showed a significant move to the upside.

The NYSE Arca Gold Bugs Index surged up by 2.3 percent even though the price of gold for December delivery slid $9.60 to $1,506.20 an ounce.

Notable strength also remained visible among software stocks, with the Dow Jones U.S. Software Index climbing by 1.3 percent.

Microsoft (MSFT) posted a strong gain after raising its quarterly dividend by $0.05 to $0.51 per share and announcing plans to buy back up to $40 billion worth of stock.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved mostly higher on Thursday. Japan's Nikkei 225 Index and China's Shanghai Composite Index climbed by 0.4 percent and 0.5 percent, respectively, although Hong Kong's Hang Seng Index bucked the uptrend and slumped by 1.1 percent.

The major European markets also moved to the upside on the day. While the French CAC 40 Index advanced by 0.7 percent, the U.K.'s FTSE 100 Index and the German DAX Index both rose by 0.6 percent.

In the bond market, treasuries pulled back off their early highs but managed to close in positive territory. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, edged down by 1.2 basis points to 1.774 percent.

Looking Ahead

Comments from several Fed officials may attract some attention on Friday amid an otherwise quiet day on the U.S. economic front.

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