Stocks Recover From Initial Move To The Downside - U.S. Commentary

By RTT News, 
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(RTTNews.com) - After moving to the downside at the open, stocks have regained some ground over the course of early trading on Wednesday. The major averages have bounced well off their lows for the young session, climbing back near the unchanged line.

Currently, the major averages are posting modest gains. The Dow is up 17.40 points or 0.1 percent at 16,446.87, the Nasdaq is up 5.42 points or 0.1 percent at 4,358.26 and the S&P 500 is up 1.91 points or 0.1 percent at 1,922.12.

The initial weakness on Wall Street was partly due to continued geopolitical concerns amid indications of an escalation of the conflict in Ukraine.

News of intense fighting in the eastern Ukrainian city of Donetsk generated some selling pressure as government forces continue their offensive against pro-Russian separatists.

Polish Foreign Minister Radoslaw Sikorski has warned that Russia could launch an invasion if Ukrainian forces continue to have success in their fight against the rebels.

Traders also continued to worry about the outlook for monetary policy following the release of a report showing a narrower than expected U.S. trade deficit.

The Commerce Department report said the U.S. trade deficit narrowed to $41.5 billion in June from a revised $44.7 billion in May. The deficit had been expected to widen to $45.0 billion.

Economists noted that the unexpectedly narrower trade deficit could lead to an upward revision to the pace of GDP growth reported for the second quarter.

However, traders seemed somewhat reluctant to continue selling stocks following the sharp drop seen over the past few sessions.

Bargain hunting may have contributed to the subsequent recovery attempt, with the S&P 500 rebounding from a two-month intraday low.

Gold stocks have shown a substantial move to the upside in early trading, driving the NYSE Arca Gold Bugs Index up by 2 percent. The strength in the sector comes as gold for December delivery is surging up $23.50 to $1,308.80 an ounce.

Significant strength has also emerged among energy stocks, which are rebounding along with the price of crude oil. Crude for September delivery is climbing $0.53 to $97.91 a barrel after ending the previous session at a six-month low.

On the other hand, notable weakness remains visible among telecom stocks, as reflected by the 1.5 percent loss being posted by the NYSE Arca Telecom Index. Sprint ( S ) is leading the way lower amid news that it has ended talks to acquire T-Mobile (TMUS).

Utilities and computer hardware stocks also continue to see some weakness in early trading, offsetting the strength in the aforementioned sectors.

In overseas trading, stock markets across the Asia-Pacific region moved to the downside during trading on Wednesday. Japan's Nikkei 225 Index fell by 1.1 percent, while Hong Kong's Hang Seng Index dipped by 0.3 percent.

The major European markets have climbed off their worst levels but continue to see considerable weakness on the day. While the U.K.'s FTSE 100 Index is down by 0.8 percent, the French CAC 40 Index and the German DAX Index are both down by 0.9 percent.

In the bond market, treasuries are seeing moderate strength after turning higher over the course of the previous session. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, is down by 3 basis points at 2.453 percent.

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