U.S. Stocks Move Moderately Lower Following Two-Day Rally

After initially showing a lack of direction, stocks have moved moderately lower over the course of morning trading on Tuesday. The major averages have all moved to the downside, giving back ground after moving sharply higher over the two previous sessions.

Currently, the major averages are off their worst levels of the day but still in negative territory. The Dow is down 70.70 points or 0.2 percent at 35,061.16, the Nasdaq is down 94.56 points or 0.7 percent at 14,145.33 and the S&P 500 is down 20.67 points or 0.5 percent at 4,494.88.

The pullback on Wall Street comes as some traders cash in on the strong upward move seen over the two previous sessions, which helped the Nasdaq and S&P 500 recover from multi-month closing lows.

Lingering concerns about the outlook for monetary policy are weighing on some sectors after the Federal Reserve signaled last week that the first interest rate hike could come as soon as March.

Traders also continue to look ahead to the release of the Labor Department’s closely watched monthly jobs report on Friday.

Economists currently expect employment to increase by 153,000 jobs in January after rising by 199,000 jobs in December. The unemployment rate is expected to hold at 3.9 percent.

The strength of the monthly jobs data could impact expectations regarding how fast the Federal Reserve will raise rates from near-zero levels in an effort to fight inflation.

Payroll processor ADP’s report on private sector employment will provide an early look at the strength of the labor market on Wednesday.

In U.S. economic news, the Institute for Supply Management released a report showing growth in U.S. manufacturing activity continued to slow in the month of January.

The ISM said its manufacturing PMI fell to 57.6 in January from a revised 58.8 in December, although a reading above 50 still indicates growth in the sector. The index decreased for the third straight month, slipping to its lowest level in over a year.

Economists had expected the manufacturing PMI to drop to 57.5 from the 58.7 originally reported for the previous month.

Among individual stocks, shares of UPS (UPS) have moved sharply higher after the delivery giant reported better than expected fourth quarter results, provided upbeat guidance and raised its dividend.

Energy giant ExxonMobil (XOM) has also shown a strong move to the upside after reporting fourth quarter earnings that beat analyst estimates and announcing a new $10 billion share repurchase program.

Meanwhile, shares of AT&T (T) have come under pressure after the telecom giant announced plans to spin off its interest in WarnerMedia in connection with the media and entertainment company’s merger with Discovery (DISCA). AT&T subsequently plans to cut its annual dividend nearly in half.

Housing stocks have come under pressure over the course of the morning, dragging the Philadelphia Housing Sector Index down by 2 percent.

Considerable weakness has also emerged among interest rate-sensitive utilities stocks, as reflected by the 1.6 percent drop by the Dow Jones Utility Average.

Networking, software and semiconductor stocks have also moved to the downside, contributing to the pullback by the tech-heavy Nasdaq.

On the other hand, steel stocks have moved sharply higher on the day, resulting in a 3.6 percent spike by the NYSE Arca Steel Index.

Energy stocks are also turning in a strong performance on the day, with the Philadelphia Oil Service Index and the NYSE Arca Oil Index jumping by 3 percent and 2.5 percent, respectively.

The rally by energy stocks comes even though the price of crude oil for March delivery is nearly flat, inching up $0.05 to $88.20 a barrel.

In overseas trading, stock markets across the Asia-Pacific region moved higher on Tuesday, although several major markets were closed for Chinese New Year. Japan’s Nikkei 225 Index rose by 0.3 percent, while Australia’s S&P/ASX 200 Index climbed by 0.5 percent.

The major European markets have also moved to the upside on the day. While the French CAC 40 Index as jumped by 1.1 percent, the U.K.’s FTSE 100 Index and the German DAX Index are both up by 0.9 percent.

In the bond market, treasuries have shown a notable downturn after seeing initial strength. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, is up by 2.2 basis points at 1.804 percent after hitting a low of 1.750 percent.

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