Stocks Pull Back Off Best Levels But Close Mostly Higher - U.S. Commentary

(RTTNews) - After showing a strong move to the upside in morning trading on Wednesday, stocks gave back some ground in the afternoon but still closed mostly higher. The upward move lifted the Nasdaq and the S&P 500 to their best closing levels in about six months.

The major averages all closed in positive territory, although the tech-heavy Nasdaq outperformed its counterparts. While the Nasdaq advanced 46.86 points or 0.6 percent to 7,895.55, the Dow rose 39.00 points or 0.2 percent to 26,218.13 and the S&P 500 edged up 6.16 points or 0.2 percent to 2,873.40.

The higher close on Wall Street came amid optimism about the latest round of trade talks between U.S. Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin and Chinese Vice Premier Liu He.

Ahead of the meetings, people briefed on the trade talks told the Financial Times top U.S. and Chinese officials have resolved most of the issues standing in the way of a deal to end their long-running trade dispute.

Officials are still haggling over how to implement and enforce the agreement, however, with Myron Brilliant, executive vice-president for international affairs at the U.S. Chamber of Commerce, telling reporters the last 10 percent is the "hardest part."

The Financial Times said the two sides remain apart on two key issues: the fate of existing U.S. tariffs on Chinese goods and the terms of an enforcement mechanism demanded by Washington to ensure that China abides by the deal.

Buying interest was somewhat subdued, however, as traders were also digesting a report from payroll processor ADP showing much weaker than expected private sector job growth in the month of March.

ADP said private sector employment rose by 129,000 jobs in March after jumping by an upwardly revised 197,000 jobs in February.

Economists had expected employment to increase by 170,000 jobs compared to the addition of 183,000 jobs originally reported for the previous month.

"The job market is weakening, with employment gains slowing significantly across most industries and company sizes," said Mark Zandi, chief economist of Moody's Analytics.

"Businesses are hiring cautiously as the economy is struggling with fading fiscal stimulus, the trade uncertainty, and the lagged impact of Fed tightening," he added. "If employment growth weakens much further, unemployment will begin to rise."

On Friday, the Labor Department is scheduled to release its more closely watched monthly employment report, which includes both public and private sector jobs,

Employment is expected to jump by 180,000 jobs in March after inching up by just 20,000 jobs in February, while the unemployment rate is expected to hold at 3.8 percent.

A separate report from the Institute for Supply Management showed service sector growth in the U.S. cooled off in March after a significant acceleration in the previous month.

The ISM said its non-manufacturing index slid to 56.1 in March after jumping to 59.7 in February, although reading above 50 still indicates growth in the service sector.

Economists had expected the index to show a more modest pullback, with forecasts calling for the index to dip to 58.0.

Sector News

Semiconductor stocks pulled back off their best levels of the day but still showed a substantial move to the upside. Reflecting the strength in the sector, the Philadelphia Semiconductor Index surged up by 2.3 percent to a record closing high.

Advanced Micro Devices (AMD) spiked by 8.5 percent after Nomura Instinet initiated coverage of the chip maker's stock with a Buy rating.

Significant strength also remained visible among chemical stocks, as reflected by the 1.6 percent jump by the S&P Chemical Sector Index. The index ended the session at its best closing level in six months.

Computer hardware and networking stocks also saw considerable strength on the day, contributing to the advance by the tech-heavy Nasdaq.

On the other hand, tobacco and natural gas stocks fell sharply over the course of the session, dragging the NYSE Arca Tobacco Index and the NYSE Arca Natural Gas Index down by 2.7 percent and 2.1 percent, respectively.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved mostly higher during trading on Wednesday. Japan's Nikkei 225 Index jumped by 1 percent, while Hong Kong's Hang Seng Index surged up by 1.2 percent.

The major European markets also moved to the upside on the day. While the German DAX Index rallied by 1.7 percent, the French CAC 40 Index advanced by 0.8 percent and the U.K.'s FTSE 100 Index climbed by 0.4 percent.

In the bond market, treasuries pulled back following the modest rebound seen in the previous session. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, rose by 3.6 basis points to 2.517 percent.

Looking Ahead

A report on weekly jobless claims may attract some attention on Thursday, although traders may be reluctant to make significant moves ahead of the release of the more closely watched monthly jobs report on Friday.