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U.S. Stocks Climb Off Worst Levels But Remain Mostly Lower

wallstreet july27 28jul20 lt

After coming under pressure early in the session, stocks have fluctuated over the course of the trading day on Tuesday but largely maintained a negative bias. While the S&P 500 briefly turned positive in recent trading, the index has since rejoined the Dow and the Nasdaq in the red.

Currently, the S&P 500 is posting a modest loss, down 3.73 points or 0.1 percent at 3,235.68. The Dow is down 95.69 points or 0.4 percent at 26,489.08 and the Nasdaq is down 48.17 points or 0.5 percent at 10,488.10.

A negative reaction to earnings news from Dow components 3M (MMM) and McDonald's (MCD) is contributing to the weakness on Wall Street.

Shares of 3M are down by 4.5 percent after the diversified manufacturer reported second quarter results that missed analyst estimates on both the top and bottom lines.

McDonald's is also slumping by 2 percent after the fast food giant reported weaker than expected second quarter earnings on a slightly bigger than expected drop in comparable-restaurant sales.

On the other hand, shares of Pfizer (PFE) have jumped by 4 percent after the drug giant and Dow component reported better than expected second quarter results and raised its full-year guidance.

Traders are also keeping an eye on developments in Washington after Republicans unveiled their version of a new coronavirus relief bill.

The GOP bill includes a reduction in unemployment benefits, which could lead to an impasse in negotiations with Democrats.

The pullback by stocks also comes after the Conference Board released a report showing consumer confidence deteriorated by more than expected in the month of July.

The Conference Board said its consumer confidence index slumped to 92.6 in July after jumping to an upwardly revised 98.3 in June.

Economists had expected the consumer confidence index to pull back to 95.7 from the 98.1 originally reported for the previous month.

The bigger than expected drop by the index came as consumers grew less optimistic about the short-term outlook for the economy.

"Large declines were experienced in Michigan, Florida, Texas and California, no doubt a result of the resurgence of COVID-19," said Lynn Franco, Senior Director of Economic Indicators at The Conference Board.

She added, "Such uncertainty about the short-term future does not bode well for the recovery, nor for consumer spending."

Nonetheless, overall trading activity is somewhat subdued as traders look ahead to the Federal Reserve's monetary policy announcement on Wednesday.

While the Fed is widely expected to leave interest rates unchanged, traders may look to the accompanying statement for clues about future plans to provide additional economic stimulus.

Sector News

Oil service stocks have come under pressure in recent trading, with the Philadelphia Oil Service Index slumping by 1.8 percent after ending the previous session at its best closing level in well over a month.

The weakness among oil service stocks comes amid a decrease by the price of crude oil, as crude for September delivery is falling $0.43 to $41.17 a barrel.

Considerable weakness also remains visible among computer hardware stocks, resulting in a 1.7 percent drop by the NYSE Arca Computer Hardware Index.

While steel, semiconductor and chemical stocks also continue to see notable weakness, airline stocks have shown a strong move to the upside on the day.

Reflecting the strength in the airline sector, the NYSE Arca Airline Index has surged up by 2.5 percent after closing lower for two straight sessions.

Interest rate-sensitive utilities and commercial real estate stocks are also seeing significant strength ahead of the Fed's monetary policy announcement on Wednesday.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region turned in a mixed performance during trading on Tuesday. Japan's Nikkei 225 Index fell by 0.3 percent, while China's Shanghai Composite Index advanced by 0.7 percent.

The major European markets also ended the day mixed. While the U.K.'s FTSE 100 Index rose by 0.4 percent, the German DAX Index closed just below the unchanged line and the French CAC 40 Index dipped by 0.2 percent.

In the bond market, treasuries have pulled back off their best levels but continue to see modest strength. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, is down by 1.4 basis points at 0.595 percent.

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