Stocks Turn Positive After Recovering From Early Downward Move - U.S. Commentary

(RTTNews) - After coming under pressure in early trading, stocks have shown a notable turnaround over the course of the trading session on Wednesday. The major averages have climbed well off their worst levels of the day and into positive territory.

In recent trading, the major averages have seen some further upside, reaching new highs for the session. The Dow is up 34.07 points or 0.2 percent at 17,874.69, the Nasdaq is up 28.90 points or 0.6 percent at 4,851.80 and the S&P 500 is up 25.77 points or 0.3 percent at 2,094.32.

The early weakness on Wall Street extended the pullback seen in the previous session amid lingering concerns about the impact of Britain's vote to leave the European Union.

The so-called Brexit vote has raised global growth worries, leading some traders to move their money into safe havens such as U.S. government bonds.

However, the negative sentiment was partly offset by the release of a report from the Institute for Supply Management showing faster than expected growth in the U.S. service sector activity in the month of June.

The ISM said its non-manufacturing index jumped to 56.5 in June from 52.9 in May, with a reading above 50 indicating growth in the service sector. Economists had expected the index to inch up to 53.3.

With the bigger than expected increase, the non-manufacturing index rose to its highest level since reaching 56.6 last November.

Andrew Hunter, Assistant Economist at Capital Economics, said, "The rebound in the ISM index reinforces our view that the U.S. economy remains on a firm footing."

"Following an acceleration to around 3% annualized in the second quarter, we still expect GDP growth to reach a solid 2% for 2016 as a whole," he added.

Before the start of trading, the Commerce Department released a separate report showing that the U.S. trade deficit widened by more than expected in the month of May.

The report said the trade deficit widened to $41.1 billion in May from $37.4 billion in April. Economists had expected the deficit to widen to $40.0 billion.

The wider than expected trade deficit came as the value of imports surged up by 1.6 percent, while the value of exports edged down by 0.2 percent.

Despite the wider deficit in May, Hunter said, "Net trade may still have provided a small boost to second-quarter GDP growth."

Later in the day, the Federal Reserve is due to release the minutes of its latest monetary policy meeting, which may shed some light on the outlook for interest rates.

Sector News

Gold stocks have shown a substantial move to the upside on the day, with the NYSE Arca Gold Bugs Index surging up by 2.3 percent. With the gain, the index has reached a nearly three-year intraday high.

The rally by gold stocks comes amid an increase by the price of the precious metal, as gold for August delivery is up $11.10 at $1,369.80 an ounce after reaching a two-year high of $1,377.50 an ounce.

Significant strength has also emerged among housing stocks, as reflected by the 1.4 percent gain being posted by the Philadelphia Housing Sector Index.

Within the housing sector, Radian Group (RDN) is posting a standout gain after the company enhanced its liquidity by redeeming a $325 million surplus note and said it will accelerate its capital plan.

Biotechnology stocks have also moved notably higher on the day, while weakness remains visible among electronic storage and airline 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 plunged by 1.9 percent, while Hong Kong's Hang Seng Index slumped by 1.2 percent.

The major European markets also showed notable moves to the downside on the day. While the U.K.'s FTSE 100 Index tumbled by 1.3 percent, the German DAX Index and the French CAC 40 Index plummeted by 1.7 percent and 1.9 percent, respectively.

In the bond market, treasuries have turned lower over the course of the session after seeing early strength. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, is up by 2.5 basis points at 1.392 percent.