U.S. Stocks Once Again Under Pressure After Seeing Initial Strength

After failing to sustain an initial move to the upside, stocks have moved mostly lower over the course of the trading day on Wednesday. With the downturn on the day, the major averages are adding to the steep losses posted during Tuesday’s session.

Currently, the major averages are off their worst levels of the day but remain firmly negative. The Dow is down 241.63 points or 0.7 percent at 33,377.25, the Nasdaq is down 70.21 points or 0.5 percent at 12,993.40 and the S&P 500 is down 25.24 points or 0.6 percent at 4,248.29.

The initial strength on Wall Street came as traders made another attempt at bargain hunting, picking up stocks at reduced levels following the steep losses posted on Tuesday.

The sharp decline in yesterday’s trading dragged the major averages down to their lowest closing levels in over three months.

However, buying interest waned shortly after the start of trading, as concerns about the outlook for interest rates continue to hang over the markets.

Recent comments from the likes of JPMorgan Chase (JPM) CEO Jamie Dimon and Minneapolis Federal Reserve President Neel Kashkari have led to worries the Federal Reserve may raise rates higher than previously anticipated.

The pullback by stocks also came as treasury yields rebounded after seeing initial weakness, with the yield on the benchmark ten-year note once again surging to its highest levels since October 2007.

In U.S. economic news, the Commerce Department released a report unexpectedly showing a modest rebound in new orders for U.S. manufactured durable goods in the month of August.

The Commerce Department said durable goods orders crept up by 0.2 percent in August after plunging by a revised 5.6 percent in July.

The uptick surprised economists, who had expected durable goods orders to fall by 0.5 percent compared to the 5.2 percent nosedive that had been reported for the previous month.

Excluding a modest decrease in orders for transportation equipment, durable goods orders rose by 0.4 percent in August after inching up by a downwardly revised 0.1 percent in July.

Economists had expected ex-transportation orders to edge up by 0.1 percent compared to the 0.5 percent increase originally reported for the previous month.

“A positive surprise with durable goods data was initially viewed as good news for the economy and possibly stocks, but good news is actually bad news for equities,” said Edward Moya, senior market analyst at OANDA.

“Signs of economic resilience will move the needle in possibly making the Fed deliver more rate hikes,” he added. “Also weighing on equities is the harsh reality that a tight oil market is not going away and that will be a major headache for the economy.”

Sector News

Gold stocks have shown a substantial move to the downside on the day, dragging the NYSE Arca Gold Bugs Index down by 3.7 percent to a ten-month intraday low.

The sell-off by gold stocks comes amid a sharp drop by the price of the precious metal, with gold for December delivery tumbling $28.90 to $1,890.90 an ounce.

Significant weakness has also emerged among interest rate-sensitive utilities stocks, as reflected by the 1.6 percent loss being posted by the Dow Jones Utility Average. With the drop, the average has hit its lowest intraday level in eleven months.

Pharmaceutical, healthcare and commercial real estate stocks have also moved to the downside on the day, while energy stocks continue to see considerable strength amid a surge by the price of crude oil.

With crude for November delivery soaring $3.20 to $93.59 a barrel, the Philadelphia Oil Service Index is up by 3.1 percent and the NYSE Arca Oil Index is up by 2.2 percent.

Other Markets

In overseas trading, most stock markets across the Asia-Pacific region moved mostly higher during trading on Wednesday. Japan’s Nikkei 225 Index and China’s Shanghai Composite Index both edged up by 0.2 percent.

Meanwhile, the major European markets moved to the downside on the day. While the French CAC 40 Index closed just below the unchanged line, the German DAX Index and the U.K.’s FTSE 100 Index fell by 0.3 percent and 0.4 percent, respectively.

In the bond market, treasuries have shown a substantial downturn over the course of the session after seeing early strength. Currently, the yield on the benchmark ten-year note, which moves opposite of its price, is up 6.0 basis points at 4.618 percent after hitting a low of 4.491 percent.

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