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U.S. Stocks Regain Ground After Initial Move To The Downside

wallstreet oct16 19sep22 lt

After moving to the downside at the start of trading on Monday, stocks have regained ground over the course of the morning. The major averages have climbed well off their early lows, with the Dow and the S&P 500 reaching positive territory.

Currently, the major averages are turning in a mixed performance. While the tech-heavy Nasdaq is down 16.93 points or 0.2 percent at 11,431.48, the S&P 500 is up 1.06 points or less than a tenth of a percent at 3,874.39 and the Dow is up 52.74 points or 0.2 percent at 30,875.16.

Lingering concerns about the outlook for the global economy contributed to the initial weakness on Wall Street after last week's warning from FedEx (FDX).

Selling pressure waned shortly after the start of trading, however, enabling traders to pick up stocks at reduced levels following recent weakness.

The recovery attempt by the major averages came after they pulled back near the two-month intraday lows set last Friday.

At the same time, buying interest has remained somewhat subdued as traders look ahead to the Federal Reserve's highly anticipated monetary policy announcement on Wednesday.

The Fed is widely expected to raise interest rates by another 75 basis points, although some see an outside chance for a 100 basis point rate hike.

CME Group's FedWatch Tool is currently indicating an 84.0 percent chance of a 75 basis points rate hike and a 16.0 percent chance of a 100 basis point rate hike,

A number of other major central banks around the world are also scheduled to announce their latest monetary policy decisions this week, including the Bank of England and the Bank of Japan.

Despite the recovery attempt by the broader markets, biotechnology stocks continue to see substantial weakness, resulting in a 2.1 percent plunge by the NYSE Arca Biotechnology Index.

Significant weakness also remains visible among healthcare stocks, as reflected by the 1.7 percent drop by the Dow Jones U.S. Health Care Index.

Computer hardware and pharmaceutical stocks are also seeing considerable weakness, while housing stocks have shown a strong move to the upside despite disappointing homebuilder confidence data.

Even though a report from the National Association of Home Builders showed homebuilder confidence slumped to an eight-year low in September, the Philadelphia Housing Sector Index is up by 1.6 percent.

Transportation stocks are also seeing notable strength following last Friday's sell-off, moving higher along with steel and banking stocks.

In overseas trading, stock markets across the Asia-Pacific region moved mostly lower during trading on Monday, with the Japanese markets closed for a holiday. China's Shanghai Composite Index fell by 0.4 percent, while Hong Kong's Hang Seng Index slumped by 1.0 percent.

Meanwhile, the major European markets have turned mixed on the day. While the German DAX Index has edged up by 0.2 percent, the French CAC 40 Index is down by 0.2 percent and the U.K.'s FTSE 100 Index is down by 0.6 percent.

In the bond market, treasuries have climbed off their worst levels but remain in negative territory. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, is up by 4.2 basis points at 3.490 percent after reaching a high of 3.510 percent.

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