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U.S. Stocks Climb Well Off Worst Levels But Remain Modestly Lower

wallstreet sept13 22jan21 lt

After coming under pressure early in the session, stocks have regained ground over the course of the trading day on Friday. The major averages have once again climbed well off their worst levels after failing to sustain an early recovery attempt.

Currently, the major averages are posting modest losses. The Dow is down 107.61 points or 0.4 percent at 31,068.40, the Nasdaq is down 12.47 points or 0.1 percent at 13,518.44 and the S&P 500 is down 6.32 points or 0.2 percent at 3,864.75.

Profit taking contributed to the initial weakness on Wall Street, as some traders looked to cash in on the recent run to new record highs.

Uncertainty about President Joe Biden's proposed $1.9 trillion coronavirus relief package also generated some selling pressure after Republican Senators Mitt Romney and Lisa Murkowski both expressed skepticism about more stimulus.

Romney and Murkowski both pointed to the recently approved $900 billion stimulus and raised questions about whether more relief is needed.

Democrats could attempt to pass a new stimulus bill without Republican support by the so-called reconciliation process, which only requires a majority.

However, Democratic Senator Joe Manchin has also expressed concerns about the cost of increasing the size of direct payments to individuals to $2,000 from $600.

A steep drop by shares of IBM Corp. (IBM) also weighed on Wall Street after the tech giant reported better than expected fourth quarter earnings but on revenues that missed analyst estimates.

Semiconductor giant Intel (INTC) is also seeing notable weakness after jumping late in the previous session after reporting better than expected fourth quarter results just before the close of trading.

Intel released its quarterly results ahead of schedule following reports that a graphic in its earnings statement had been the object of unauthorized access.

Nonetheless, selling pressure has waned over the course of the session, as some traders use the initial drop to pick up stocks at lower levels amid expectations the markets will see further upside.

A report from the National Association of Realtors showing an unexpected rebound in existing home sales in the month of December may also have helped offset the early negative sentiment.

NAR said existing home sales climbed by 0.7 percent to an annual rate of 6.76 million in December after tumbling by 2.2 percent to a revised rate of 6.71 million in November.

The rebound surprised economists, who had expected existing home sales to slump by 2.1 percent to a rate of 6.55 million from the 6.69 million originally reported for the previous month.

With the unexpected monthly increase, existing home sales in December were up by 22.2 percent compared to the same month a year ago.

"Home sales rose in December, and for 2020 as a whole, we saw sales perform at their highest levels since 2006, despite the pandemic," said Lawrence Yun, NAR's chief economist.

He added, "What's even better is that this momentum is likely to carry into the new year, with more buyers expected to enter the market."

Sector News

Computer hardware stocks have climbed off their worst levels of the day but continue to see considerable weakness, with the NYSE Arca Computer Hardware Index slumping by 2 percent after ending the previous session at a record closing high.

Substantial weakness also remains visible among steel stocks, as reflected by the 1.8 percent drop by the NYSE Arca Steel Index.

Airline stocks have also shown a significant move to the downside on the day, dragging the NYSE Arca Airline Index down by 1.8 percent.

Oil service, brokerage, and semiconductor stocks also continue see notable weakness but have climbed off their worst levels of the day.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved mostly lower during trading on Friday. Japan's Nikkei 225 Index fell by 0.3 percent ,while Hong Kong's Hang Seng Index tumbled by 1.6 percent.

The major European markets also moved to the downside on the day. While the French CAC 40 Index slid by 0.6 percent, the U.K.'s FTSE 100 Index dipped by 0.3 percent and the German DAX Index edged down by 0.2 percent.

In the bond market, treasuries have moved higher following the modest drop seen in the previous session Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, is down by 2.3 basis points at 1.086 percent.

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