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Stocks Extending Yesterday's Recovery In Morning Trading - U.S. Commentary


Following the substantial recovery seen over the course of the previous session, stocks are seeing further upside in morning trading on Tuesday. The major averages have climbed firmly into positive territory, with the Dow and the S&P 500 bouncing further off their worst intraday levels in several months.

Currently, the major averages are holding on to strong gains. The Dow is up 198.47 points or 0.8 percent at 24,621.73, the Nasdaq is up 92.18 points or 1.3 percent at 7,112.70 and the S&P 500 is up 27.59 points or 1.1 percent at 2,665.31.

Renewed optimism about U.S.-China trade talks has generated early buying interest after a telephone call between top officials from the world's two largest economies.

China's Commerce Ministry said Chinese Vice Premier Liu He spoke with U.S. Treasury Secretary Steven Mnuchin and U.S. Trade Representative Robert Lighthizer.

"Both sides exchanged views on putting into effect the consensus reached by the two countries' leaders at their meeting, and pushing forward the timetable and roadmap for the next stage of economic and trade consultations work," the ministry said in a statement.

Indications the talks are moving forward has offset some of the skepticism about the potential for a trade deal after U.S. President Donald Trump and Chinese President Xi Jinping agreed to a 90-day trade truce earlier this month.

A report from Bloomberg News that China is moving toward cutting tariffs on imported U.S.-made cars has added to the positive sentiment.

Citing people familiar with the matter, Bloomberg said a proposal to reduce tariffs on cars made in the U.S. to 15 percent from the current 40 percent has been submitted to China's Cabinet.

Just after his meeting with Xi, Trump claimed in a post on Twitter that China had agreed to reduce and remove tariffs on cars coming into China from the U.S.

Meanwhile, traders have largely shrugged off a report from the Labor Department unexpectedly showing a modest uptick in producer prices in the month of November.

The Labor Department said its producer price index for final demand inched up by 0.1 percent in November after climbing by 0.6 percent in October. Economists had expected prices to be unchanged.

Excluding food and energy prices, core producer prices rose by 0.3 percent in November following a 0.5 percent increase in October. Core prices had been expected to edge up by 0.1 percent.

Semiconductor stocks have shown a substantial move to the upside in morning trading, driving the Philadelphia Semiconductor Index up by 2.9 percent. The index continues to rebound after ending last Friday's trading at its lowest closing level in over a month.

Considerable strength has also emerged among chemical stocks, as reflected by the 2.2 percent jump by the S&P Chemicals Index. In the previous session, the index rebounded strongly after hitting its lowest intraday level in well over a year.

Software, networking, computer hardware, and steel stocks are also seeing notable strength on the day, moving higher along with most of the other major sectors.

In overseas trading, stock markets across the Asia-Pacific region turned in a mixed performance during trading on Tuesday. Japan's Nikkei 225 index fell by 0.3 percent, while Hong Kong's Hang Seng Index crept up by 0.1 percent.

Meanwhile, the major European markets have shown strong moves to the upside on the day. While the German DAX Index has surged up by 2.1 percent, the French CAC 40 Index is up by 1.9 percent and the U.K.'s FTSE 100 Index is up by 1.6 percent.

In the bond market, treasuries have climbed off their lows of the session but continue to see modest weakness. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, is up by 1.2 basis points at 2.868 percent.

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