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U.S. Stocks Climb Off Worst Levels But Remain Firmly Negative

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After coming under pressure early in the session, stocks have regained some ground over the course of the trading day on Wednesday. The major averages have climbed well off their lows of the session but remain firmly in negative territory.

The Dow plunged by nearly 600 points in early trading to hit a two-month low and is currently down 350.31 points or 1.4 percent at 25,679.21. The Nasdaq is down 51.14 points or 0.7 percent at 7,782.13 and the S&P 500 is down 29.17 points or 1 percent at 2,852.60.

The pullback on Wall Street comes as the escalating U.S.-China trade war has investors paying close attention to daily developments on the currency front.

The People's Bank of China set the midpoint for onshore yuan trading at 6.9996 per dollar, slightly stronger than the key 7.00 per dollar level but 0.4 percent weaker than 6.9683 on Tuesday.

The Chinese central bank setting the midpoint for the Chinese currency at a stronger than expected level contributed yesterday's rally.

Negative sentiment has also been generated in reaction to disappointing earnings from Disney (DIS), with the entertainment giant slumping by 5.1 percent.

After the close of trading on Tuesday, Disney reported fiscal third quarter results that missed analyst estimates on both the top and bottom lines.

Trades are also digesting aggressive interest rate cuts by central banks in India, New Zealand and Thailand amid concerns about the global impact of the U.S.-China trade war.

Citing the overseas rate cuts, President Donald Trump claimed in a series of posts on Twitter that the problem is "not China" but rather a Federal Reserve that is "too proud to admit their mistake of acting too fast and tightening too much (and that I was right!)"

"They must Cut Rates bigger and faster, and stop their ridiculous quantitative tightening NOW," Trump tweeted. "Yield curve is at too wide a margin, and no inflation!"

"Incompetence is a terrible thing to watch, especially when things could be taken care of sooo easily," he added. "We will WIN anyway, but it would be much easier if the Fed understood, which they don't, that we are competing against other countries, all of whom want to do well at our expense!"

Sector News

Banking stocks have moved sharply lower over the course of the trading session, dragging the KBW Bank Index down by 3.5 percent. Earlier in the session, the index hit its lowest intraday level in almost three years.

The weakness among banking stocks comes amid a continued slump in treasury yields, which are extending the steep drop seen over the past several sessions.

Substantial weakness also remains visible among oil service stocks, as reflected by the 3.5 percent nosedive by the Philadelphia Oil Service Index. The index has fallen to a nearly eighteen-year intraday low.

Oil service stocks are tumbling along with the price of crude oil, with crude for September delivery plunging $2.74 to $50.89 a barrel.

Brokerage, telecom, and steel stocks are also seeing significant weakness, moving lower along with most of the other major sectors.

Meanwhile, gold stocks are among the few groups bucking the downtrend, benefiting from a sharp increase by the price of the precious metal.

With gold for December delivery soaring $35.80 to $1,520 an ounce, the NYSE Arca Gold Bugs Index has surged up by 2.3 percent.

Other Markets

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

Meanwhile, the major European markets all moved to the upside on the day. While the U.K.'s FTSE 100 Index rose by 0.3 percent, the French CAC 40 Index and the German DAX Index climbed by 0.6 percent and 0.7 percent, respectively.

In the bond market, treasuries have resumed their recent rally after ending the previous session roughly flat. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, is down by 10.1 basis points at 1.638 percent.

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