U.S. Stocks Move Higher As Treasury Yields Move Back To The Downside

Stocks showed a lack of direction in early trading on Wednesday but have moved mostly higher over the course of the session. The tech-heavy Nasdaq has shown a notable upward move, bouncing off its lowest closing level in four months.

The major averages have given back ground in recent trading, with the Dow dipping back below the unchanged line. While the Dow is down 25.63 points or 0.1 percent at 32,976.75, the S&P 500 is up 9.66 points or 0.2 percent at 4,239.11 and the Nasdaq is up 95.91 points or 0.7 percent at 13,155.38.

Trading on Wall Street has largely been driven by activity in the bond market, with treasury yields fluctuating over the course of the session.

The yield on the benchmark ten-year note initially gave back ground after reaching its highest levels in over sixteen years on Tuesday but subsequently bounced back near the unchanged line.

The volatility in the bond market contributed to the lackluster performance on Wall Street in early trading amid ongoing concerns about the outlook for interest rates.

However, treasury yields have once again moved to the downside as the day has progressed, contributing the upward move by stocks.

Traders have largely shrugged off a report from payroll processor ADP showing private sector job growth slowed by much more than expected in the month of September.

ADP said private sector employment rose by 89,000 jobs in September after climbing by an upwardly revised 180,000 jobs in August.

Economists had expected private sector employment to advance by 153,000 jobs compared to the addition of 177,000 jobs originally reported for the previous month.

The increase in September reflected the slowest pace of job growth since January 2021, when private employers shed jobs.

While Jeffrey Roach, Chief Economist for LPL Financial, said a cooling labor market will take pressure off the Federal Reserve, he urged traders to proceed with caution ahead of the Labor Department’s more closely watched report on Friday.

Economists expect employment to increase by 170,000 jobs in September after climbing by 187,000 jobs in August, while the unemployment rate is expected to edge down to 3.7 percent from 3.8 percent.

The Institute for Supply Management released a separate report this morning showing a modest slowdown in the pace of growth in U.S. service sector activity in the month of September.

The ISM said its services PMI edged down to 53.6 in September from 54.5 in August, although a reading above 50 still indicates growth. The modest decrease matched economist estimates.

Sector News

Airline stocks have moved sharply higher over the course of the session, with the NYSE Arca Airline Index soaring by 2.5 percent after ending the previous session at a nine-month closing low.

Significant strength has also emerged among housing stocks, as reflected by the 1.4 percent gain being posted by the Philadelphia Housing Sector Index. The index is bouncing off its lowest closing level in almost four months.

On the other hand, energy stocks continue to see substantial weakness amid a steep drop by the price of crude oil.

With crude for November delivery plummeting $4.31 to $84.92 a barrel, the Philadelphia Oil Service Index is down by 4.5 percent and the NYSE Arca Oil Index is down by 4.0 percent.

Natural gas, networking and gold stocks also continue to see notable weakness, limiting the upside for the broader markets.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved notably lower during trading on Wednesday. Japan’s Nikkei 225 Index plummeted by 2.3 percent, while Hong Kong’s Hang Seng Index slid by 0.8 percent.

Meanwhile, the major European markets turned in a mixed performance on the day. While the German DAX Index inched up by 0.1 percent, the French CAC 40 Index closed nearly unchanged and the U.K.’s FTSE 100 Index fell by 0.8 percent.

In the bond market, treasuries have fluctuated over the course of the session but largely maintained a positive bias. Currently, the yield on the benchmark ten-year note, which moves opposite of its price, is down 5.2 basis points at 4.750 percent.

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