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U.S. Stocks Recover From Early Sell-Off But Close Modestly Lower

wallstreet aug27 05oct22 lt

Stocks staged a significant recovery attempt after pulling back sharply in early trading on Wednesday but still ended the day modestly lower. The major averages gave back ground after moving sharply higher over the two previous sessions.

The major averages pulled back going into the close, finishing the session in negative territory. The Dow edged down 42.45 points or 0.1 percent to 30,273.87, the Nasdaq fell 27.77 points or 0.3 percent to 11,148.64 and the S&P 500 dipped 7.65 points or 0.2 percent to 3,783.28.

The early weakness on Wall Street came as traders looked to cash in on the strong gains posted early in the week amid lingering concerns about the outlook for the global economy.

Central banks around the world appear poised to continue raising interest in the months ahead, potentially tipping the global economy into a recession as they seek to combat elevated inflation.

A rebound by treasury yields also weighed on the markets, with the yield on the benchmark ten-year note regaining ground after moving notably lower over the two previous sessions.

Selling pressure has waned over the course of the session, however, as traders may feel the economic worries have already been priced into the markets.

The modestly lower close on Wall Street came as upbeat U.S. economic data has added to worries the Federal Reserve will maintain its strategy of aggressively raising interest rates going into the end of the year.

Payroll processor ADP released a report showing private sector employment in the U.S. increased by slightly more than expected in the month of September.

ADP said private sector employment surged by 208,000 jobs in September after climbing by an upwardly revised 185,000 jobs in August.

Economists had expected employment to jump by 200,000 jobs compared to the addition of 132,000 jobs originally reported for the previous month.

Meanwhile, the Institute for Supply Management released a report showing a modest slowdown in the pace of growth in U.S. service sector activity in the month of September.

The ISM said its services PMI edged down to 56.7 in September from 56.9 in August, although a reading above 50 still indicates growth in the sector. Economists had expected the index to dip to 56.0.

Sector News

Telecom stocks showed a significant move to the downside on the day, dragging the NYSE Arca North American Telecom Index down by 2.8 percent.

Interest rate-sensitive utilities and commercial real estate stocks also saw considerable weakness, with the Dow Jones Utility Average and the Dow Jones U.S. Real Estate Index tumbling by 2.6 percent and 1.9 percent, respectively.

Gold, banking and chemical stocks also showed notable moves to the downside, contributing to the lower close by the major averages.

On the other hand, oil service stocks moved sharply higher on the day, benefiting from a jump by the price of crude oil. Crude for November delivery shot up $1.24 to $87.76 a barrel after OPEC and its allies announced plans to cut production by 2 million barrels per day.

Reflecting the strength in the oil service sector, the Philadelphia Oil Service Index spiked by 3.7 percent, extending a recent upward trend.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved mostly higher during trading on Wednesday. Japan's Nikkei 225 Index rose by 0.5 percent, while Hong Kong's Hang Seng Index spiked by 5.9 percent.

Meanwhile, the major European markets moved to the downside on the day. While the German DAX Index slumped by 1.2 percent, the French CAC 40 Index slid by 0.9 percent and the U.K.'s FTSE 100 Index fell by 0.4 percent.

In the bond market, treasuries pulled back sharply after moving notably higher over the two previous sessions. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, jumped 14.2 basis points to 3.759 percent.

Looking Ahead

A report on weekly jobless claims may attract attention on Thursday, although trading activity may be somewhat subdued ahead of the release of the more closely watched monthly jobs report on Friday.

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