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U.S. Stocks Close Firmly Positive Following Late-Day Advance

wallstreet aug29 19sep22 lt

Stocks recovered from an initial move to the downside and spent much of the trading session on Monday showing a lack of direction before advancing going into the close. The major averages all regained ground following the steep losses posted last week.

The major averages reached new highs late in the session, ending the day firmly positive. The Dow rose 197.26 points or 0.6 percent to 31,019.68, the Nasdaq advanced 86.62 points or 0.8 percent to 11,535.02 and the S&P 500 climbed 26.56 points or 0.7 percent to 3,899.89.

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 subsequently rebound by the major averages came after they pulled back near the two-month intraday lows set last Friday.

Nonetheless, trading activity remained somewhat subdued as traders looked 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 82.0 percent chance of a 75 basis points rate hike and a 18.0 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.

Traders largely shrugged off a report from the National Association of Home Builders showing U.S. homebuilder confidence declined for the ninth consecutive month in September.

The report showed the NAHB/Wells Fargo Housing Market Index slid to 46 in September from 49 in August. Economists had expected the index to edge down to 48.

With the bigger than expected decrease, the housing market index dropped to its lowest level since hitting 45 in May 2014.

Sector News

Airline stocks showed a substantial rebound after falling sharply in the previous session, with the NYSE Arca Airline Index soaring by 3.0 percent after ending last Friday's trading at its lowest closing level in well over a month.

Steel stocks also saw significant strength following recent weakness, driving the NYSE Arca Steel Index up by 2.9 percent. The index ended the previous session at a nearly two-month closing low.

Considerable strength was also visible among gold stocks, as reflected by the 2.6 percent surge by the NYSE Arca Gold Bugs Index. The rally by gold stocks came despite a modest decrease by the price of the previous metal.

Housing, chemical and financial stocks also saw notable strength on the day, while weakness remained visible among computer hardware stocks.

Other Markets

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 turned in a mixed performance on the day. While the German DAX Index rose by 0.3 percent, the French CAC 40 Index dipped by 0.3 percent and the U.K.'s FTSE 100 Index decreased 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 2.1 basis points at 3.469 percent after reaching a high of 3.510 percent.

Looking Ahead

A report on new residential construction in the U.S. may attract some attention on Tuesday, although trading activity may be somewhat subdued ahead of the Fed announcement on Wednesday.

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