U.S. Stocks Pull Back Off Early Highs But Remain Firmly Positive

Stocks have given back some ground after an early rally but remain mostly positive in afternoon trading on Monday. With the upward move on the day, the major averages are extending the notable rebound seen last week.

Currently, the major averages are hovering firmly in positive territory. The Dow is up 182.17 points or 0.6 percent at 32,333.88, the Nasdaq is up 109.77 points or 0.9 percent at 12,222.08 and the S&P 500 is up 32.91 points or 0.8 percent at 4,100.27.

The early rally on Wall Street came as traders continued to pick up stocks at relatively reduced levels after the major averages snapped a three-week losing streak last week, bouncing well off their lowest levels in over a month.

Optimism about a slowdown in inflation also contributed to the strength On Wall Street ahead of the release of a closely watched report on consumer prices on Tuesday.

The report is expected to show a continued slowdown in the annual rate of consumer price growth to 8.1 percent in August from 8.5 percent in July.

Meanwhile, the annual rate of growth by core consumer prices, which exclude food and energy prices, is expected to tick up to 6.0 percent in August from 5.9 percent in July.

Buying interest has waned somewhat as the day has progressed, however, as the data is not likely to impact for a 75 basis point interest rate increase by the Federal Reserve next week.

“Wall Street is locked into Tuesday’s inflation report that will likely show pricing pressure relief but will not change the Fed from maintaining an aggressive stance of tightening monetary policy,” said Edward Moya, senior market analyst at OANDA.

He added, “Even if inflation falls below the 8% level, the Fed should still deliver a 75 basis-point rate hike at the September 21st policy decision.”

Reports on producer prices, import and export prices, retail sales, industrial production and consumer sentiment are also likely to attract attention in the coming days.

Sector News

Gold stocks continue to see substantial strength in afternoon trading, resulting in a 2.1 percent surge by the NYSE Arca Gold Bugs Index.

The rally by gold stocks comes amid an increase by the price of the precious metal, with gold for December delivery climbing $13.20 to $1,741.80 an ounce.

A sharp increase by the price of natural gas is also contributing to significant strength among natural gas stocks, as reflected by the 1.9 percent jump by the NYSE Arca Natural Gas Index.

Oil, computer hardware and transportation stocks are also seeing notable strength, moving higher along with most of the other major sectors.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved mostly higher on Monday, with markets in China, Hong Kong and South Korea closed for holidays. Japan’s Nikkei 225 Index shot up by 1.2 percent, while Australia’s S&P/ASX 200 Index jumped by 1.0 percent.

The major European markets also showed strong moves to the upside on the day. While the German DAX Index soared by 2.4 percent, the French CAC 40 Index spiked by 2.0 percent and the U.K.’s FTSE 100 Index surged by 1.7 percent.

In the bond market, treasuries have pulled back off their early highs but remain positive. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, is down by 1.9 basis points at 3.302 percent.

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