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U.S. Stocks Climb Off Worst Levels But Close Mostly Lower

Stocks regained ground after an early move to the downside on Wednesday but still ended the day mostly lower. The major averages all finished the day in negative territory following the mixed performance on Tuesday, with the Dow closing lower for the third consecutive session.

After falling by more than 200 points in early trading, the Dow ended the day down just 23.39 points or 0.1 percent at 38,949.02. The S&P 500 dipped 8.42 points or 0.2 percent to 5,069.76, while the Nasdaq slid 87.56 points or 0.6 percent at 15,947.74.

The early weakness on Wall Street came as some traders looked to cash in on the recent strength in the markets ahead of the release of closely watched readings on consumer price inflation on Thursday.

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The inflation readings, which are said to be preferred by the Federal Reserve, are expected to show the annual rate of consumer price growth slowed to 2.4 percent in January from 2.6 percent in December.

The annual rate of growth by core consumer prices, which exclude food and energy prices, is also expected to dip to 2.8 percent in January from 2.9 percent in December.

With Fed officials saying they need greater confidence inflation is slowing before they consider cutting interest rates, the data could have a significant impact on the outlook for rates.

Selling pressure waned shortly after the start of trading, however, with the subsequent recovery attempt potentially reflecting a positive reaction to revised data showing the U.S. economy grew by slightly less than previously estimated in the fourth quarter of 2023.

The Commerce Department said the jump by real gross domestic product in the fourth quarter was downwardly revised to 3.2 percent from the previously reported 3.3 percent. Economists had expected the surge in GDP to be unrevised.

“It is only in the topsy-turvy world of Wall Street where bad news can be good news (e.g. lower economic growth is good) because of the interplay between the economy, markets and the Federal Reserve,” said Chris Zaccarelli, Chief Investment Officer for Independent Advisor Alliance.

He added, “In a market environment where people are worried about a Fed keeping rates higher for longer, any drop in economic activity (or inflation) can be seen as another reason why the Fed can cut rates sooner.”

Sector News

Gold stocks turned in some of the market’s worst performances on the day, dragging the NYSE Arca Gold Bugs Index down by 1.5 percent.

The weakness among gold stocks came amid a modest decrease by the price of the precious metal, with gold for April delivery edging down $1.40 to $2,042.70 an ounce.

Notable weakness was also visible among semiconductor stocks, as reflected by the 1.1 percent loss posted by the Philadelphia Semiconductor Index.

Steel, airline and networking stocks also moved to the downside on the day, while considerable strength emerged among commercial real estate stocks.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved mostly lower during trading on Wednesday. Japan’s Nikkei 225 Index edged down by 0.1 percent, while China’s Shanghai Composite Index tumbled by 1.9 percent.

Meanwhile, the major European markets turned in a mixed performance on the day. While the U.K.’s FTSE 100 Index slid by 0.1 percent, the French CAC 40 Index inched up by 0.1 percent and the German DAX Index rose by 0.3 percent.

In the bond market, treasuries regained ground after moving lower over the two previous sessions. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, fell 4.1 basis points to 4.274 percent.

Looking Ahead

The inflation readings are likely to be in the spotlight on Thursday, although traders are also likely to keep an eye on reports on weekly jobless claims and pending home sales.

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