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U.S. Stocks Show Significant Recovery From Early Sell-Off

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Stocks showed a substantial turnaround over the course of the trading session on Wednesday, recovering from an early sell-off to end the day mostly higher. The major averages all climbed into positive territory, although the Dow pulled back below the unchanged line going into the close.

After plunging by nearly 600 points in early trading to hit a two-month intraday low, the Dow showed a significant rebound but still ended the day down 22.45 points or 0.1 percent at 26,007.07.

Meanwhile, the broader Nasdaq and S&P 500 finished the session in positive territory. The tech-heavy Nasdaq climbed 29.56 points or 0.3 percent to 7,862.83 and the S&P 500 inched up 2.21 points or 0.1 percent to 2,883.98.

The early sell-off on Wall Street came 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 rally seen on Wall Street on Tuesday.

Negative sentiment was also generated in reaction to disappointing earnings from Disney (DIS), with the entertainment giant slumping by 4.9 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.

Selling pressure waned shortly after the start of trading, however, inspiring traders to pick up stocks at reduced levels as treasury yields rebounded from an early move to the downside.

Traders were 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

Gold stocks showed a significant move to the upside on the day, driving the Philadelphia Gold And Silver Index up by 1.8 percent. With the jump, the index ended the session at its best closing level in well over a year.

The rally by gold stocks came amid a sharp increase by the price of the precious metal, with gold for December delivery soaring $35.40 to $1,519.60 an ounce.

Considerable strength also emerged among chemical stocks, as reflected by the 1.4 percent gain posted by the S&P Chemical Sector Index. The index rebounded after ending the previous session at a two-month closing low.

Housing and commercial real estate stocks also moved higher over the course of the session, while notable weakness remained visible among financial, oil service, and telecom stocks.

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 0.4 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 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, slid 5.5 basis points to 1.684 percent.

Looking Ahead

Developments on the trade front are likely to remain in focus on Thursday, potentially overshadowing reports on weekly jobless claims and wholesale inventories.

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