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Profit Taking Contributes To Pullback On Wall Street

wallstreet oct03 09nov21 lt

After trending higher over the past several sessions, stocks gave back some ground during trading on Tuesday. The major averages pulled back off yesterday's record closing highs, although selling pressure remained relatively subdued.

The major averages climbed well off their worst levels of the day but still closed in negative territory. The Dow fell 112.24 points or 0.3 percent to 36,319.98, the Nasdaq slid 95.81 points or 0.6 percent to 15,886.54 and the S&P 500 dropped 16.45 points or 0.4 percent to 4,685.25.

The pullback on Wall Street partly reflected profit taking, as some traders cashed in on the recent strength in the markets.

The Nasdaq and the S&P 500 moved lower after closing higher for eleven and eight consecutive sessions, respectively.

Largely upbeat quarterly results contributed to the recent strength on Wall Street, although traders may be looking for the next catalyst as the earnings season starts to wind down.

Economic news may begin to attract increased attention, as investors try to gauge when the Federal Reserve will start to begin raising interest rates.

The Fed has announced plans to begin scaling back its asset purchases but signaled that it will not be in a hurry to raise rates.

On the U.S. economic front, the Labor Department released a report showing producer prices increased by slightly more than anticipated in the month of October.

The Labor Department said its producer price index for final demand advanced by 0.6 percent in October after climbing by 0.5 percent in September. Economists had expected another 0.5 percent increase.

Core producer prices, which exclude prices for food, energy, and trade services, rose by 0.4 percent in October after inching up by 0.1 percent in September. Core prices were expected to edge up by 0.2 percent.

Compared to the same month a year ago, producer prices in October were up by 8.6 percent, unchanged from the previous month.

Meanwhile, the report showed the annual rate of growth in core producer prices accelerated to 6.2 percent from 5.9 percent.

Sector News

Steel stocks gave back ground after rallying on Monday following passage of the $1 trillion infrastructure bill. The NYSE Arca Steel Index fell by 1.4 percent after jumping by 2.6 percent in the previous session.

Considerable weakness also emerged among transportation stocks, as reflected by the 1.4 percent drop by the Dow Jones Transportation Average.

Biotechnology stocks also showed a notable move to the downside on the day, dragging the NYSE Arca Biotechnology Index down by 1.4 percent.

On the other hand, housing stocks moved sharply higher over the course of the session, with the Philadelphia Housing Sector Index jumping by 2 percent to its best closing level in over five months.

Gold stocks also turned in a strong performance amid an uptick by the price of the precious metal, resulting in a 1.8 percent gain by the NYSE Arca Gold Bugs Index.

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 slid by 0.8 percent, while China's Shanghai Composite Index crept up by 0.2 percent.

Meanwhile, the major European markets all moved lower over the course of the session. While the U.K.'s FTSE 100 Index fell by 0.4 percent, the French CAC 40 Index edged down by 0.1 percent and the German DAX Index closed just below the unchanged line.

In the bond market, treasuries moved notably higher following the pullback seen in the previous session. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, slid 6.5 basis points to 1.432 percent.

Looking Ahead

Trading on Wednesday may be impacted by reaction to reports on consumer price inflation and weekly jobless claims.

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