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Stocks Stage Significant Recovery From Morning Weakness - U.S. Commentary


After moving sharply lower in morning trading, stocks staged a substantial turnaround over the course of the trading session on Monday. The major averages climbed well off their worst levels of the day and into positive territory.

The major averages all closed higher, although the Nasdaq outperformed its counterparts, climbing 51.27 points or 0.7 percent to 7,020.52. The Dow inched up 34.31 points or 0.1 percent to 24,423.26 and the S&P 500 edged up 4.64 points or 0.2 percent to 2,637.72.

The turnaround on Wall Street came as traders went bargain hunting after the early weakness extended the sell-off seen last week.

The Dow and the S&P 500 rebounded after hitting their lowest intraday levels in seven and eight months, respectively.

Light trading activity may have contributed to the volatility, as some traders remained on the sidelines amid a lack of major U.S. economic data.

The economic calendar remains relatively light throughout the week, although reports on producer and consumer price inflation, retail sales, and industrial production are likely to attract attention in the coming days.

Traders may nonetheless remain reluctant to make significant moves ahead of the Federal Reserve's monetary policy meeting next week.

With the Fed widely expected to raise interest rates by another quarter point, traders will closely scrutinize the accompanying statement for clues about future rate hikes.

The early weakness on Wall Street reflected lingering concerns about the global economic outlook along with skepticism about the potential for a long-term trade deal between the U.S. and China.

Negative sentiment was generated by the release of a report from the Chinese customs office showing slower export growth.

Chinese exports rose 5.4 percent in November from a year earlier, marking the weakest performance since a contraction in March. Import growth stood at 3 percent, the slowest since October of 2016.

Data showing that the Japanese economy contracted the most in over four years in the third quarter also added to investor worries over slowing global growth.

Sector News

Technology stocks helped lead the rebound on Wall Street, as reflected by the significant advance by the tech-heavy Nasdaq.

Within the tech sector, software stocks turned in some of the best performances, with the Dow Jones Software Index jumping by 2 percent.

Considerable strength also emerged among semiconductor and networking stocks, driving the Philadelphia Semiconductor Index and the NYSE Arca Networking Index up by 1.4 percent and 1.2 percent, respectively.

On the other hand, substantial weakness remained visible among energy stocks, which moved lower along with the price of crude oil. Crude for January delivery tumbled $1.61 to $51 a barrel.

Banking, steel, and housing stocks climbed off their worst levels but also ended the day notably lower, limiting the upside for the broad markets.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved notably lower during trading on Monday. Japan's Nikkei 225 Index plunged by 2.1 percent, while Hong Kong's Hang Seng Index tumbled by 1.2 percent.

The major European markets also moved to the downside on the day. While the U.K.'s FTSE 100 Index fell by 0.8 percent, the French CAC 40 Index and the German DAX Index both slumped by 1.5 percent.

In the bond market, treasuries showed a lack of direction after trending higher in recent sessions. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, crept up by less than a basis point to 2.856 percent.

Looking Ahead

Trading on Tuesday may be impacted by reaction to the Labor Department's report on producer prices in the month of November.

Producer prices are expected to come in unchanged in November, while core producer prices, which exclude food and energy prices, are expected to inch up by 0.1 percent.

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