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U.S. Stocks Give Back Ground After Seeing Initial Strength

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After showing a strong move to the upside at the start of trading on Thursday, stocks have given back ground over the course of the morning. The major averages have pulled back well off their highs of the session, with the Dow briefly dipping into negative territory.

Currently, the major averages are all in positive territory, although the Nasdaq is outperforming its counterparts. While the Nasdaq is up 90.14 points or 0.8 percent at 11,257.65, the Dow is up 60.10 points or 0.2 percent at 27,841.80 and the S&P 500 is up 8.80 points or 0.3 percent at 3,371.80.

The initial strength on Wall Street partly reflected continued optimism about a new stimulus bill after House Democrats delayed a vote on their coronavirus relief package.

The delayed vote on the $2.2 trillion Democratic bill, which Republican leaders have flatly rejected, is intended to give lawmakers more time to reach an agreement.

House Speaker Nancy Pelosi and Treasury Secretary Steven Mnuchin failed to reach an agreement on a new bill during a meeting on Wednesday but noted talks will continue.

However, buying interest waned after a source told NBC News that Pelosi sounded "frustrated" and "fired up" when talking about the state of the discussions during a Democratic whip conference call

Pelosi said the GOP does not "share our values" of want to make necessary investments in state and local funding and health-related priorities, the source told NBC News.

On the U.S. economic front, the Labor Department released a report showing a bigger than expected drop in first-time claims for U.S. unemployment benefits in the week ended September 26th.

The report said initial jobless claims fell to 837,000, a decrease of 36,000 from the previous week's revised level of 873,000.

Economists had expected jobless claims to dip to 850,000 from the 870,000 originally reported for the previous week.

Meanwhile, the Commerce Department released a separate report showing a steep drop in U.S. personal income in the month of August, with the sharp pullback reflecting a decrease in unemployment insurance benefits.

The Commerce Department said personal income tumbled by 2.7 percent in August after rising by an upwardly revised 0.5 percent in July.

Economists had expected personal income to slump by 2.5 percent compared to the 0.4 percent increase originally reported for the previous month.

At the same time, the report said personal spending climbed by 1.0 percent in August after jumping by a downwardly revised 1.5 percent in July.

Personal spending was expected to increase by 0.8 percent compared to the 1.9 percent spike originally reported for the previous month.

The Institute for Supply Management also released a report unexpectedly showing a modest slowdown in the pace of growth in manufacturing activity in the month of September.

The ISM said its purchasing managers index edged down to 55.4 in September after rising to 56.0 in August. While a reading above 50 still indicates growth in the manufacturing sector, economists had expected the index to inch up to 56.3.

Airline stocks are seeing significant strength in morning trading, with the NYSE Arca Airline Index climbing by 1.5 percent.

Considerable strength has also emerged among semiconductor stocks, as reflected by the 1.4 percent gain being posted by the Philadelphia Semiconductor Index.

Software and retail stocks are also seeing notable strength on the day, while energy stocks are falling sharply along with the price of crude oil. Crude for November delivery is plunging $2.16 to $38.06 a barrel.

Reflecting the weakness in the energy sector, the NYSE Arca Oil Index is down by 3.2 percent, the Philadelphia Oil Service Index is down by 2.8 percent and the NYSE Arca Natural Gas Index is down by 2.1 percent.

In overseas trading, the Tokyo Stock Exchange halted trading on Thursday due to a technical issue, while markets in China, Hong Kong, South Korea and Taiwan were closed for holidays. Australia's S&P/ASX 200 Index jumped by 1 percent.

Meanwhile, the major European markets have turned mixed on the day. While the German DAX Index has dipped by 0.3 percent, the U.K.'s FTSE 100 Index is up by 0.2 percent and the French CAC 40 Index is up by 0.5 percent.

In the bond market, treasuries have climbed well 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 1.4 basis points at 0.691 percent.

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