U.S. Stocks Pull Back Off Best Levels But Remain Mostly Positive

After showing a strong move to the upside early in the session, stocks have given back some ground over the course of the trading day on Tuesday but remain mostly positive. The upward move on the day comes following the steep drop seen in the previous session.

Currently, the major averages are holding on to gains but are well off their highs of the session. The Dow is up 125.63 points or 0.4 percent at 34,433.71, the Nasdaq is up 107.59 points or 0.8 percent at 13,519.55 and the S&P 500 is up 22.52 points or 0.5 percent at 4,435.05.

The early rebound on Wall Street came as traders seem optimistic that inflation has peaked following the release of the Labor Department’s report on consumer prices in the month of March.

While a spike in gasoline prices contributed to a jump in consumer prices, core prices increased by less than economists had expected.

The Labor Department said its consumer price index surged by 1.2 percent in March after climbing by 0.8 percent in February. The sharp increase in consumer prices matched economist estimates.

The jump in consumer prices came as gasoline prices skyrocketed by 18.3 percent, accounting for over half of the monthly increase.

With crude oil prices pulling back off their recent highs, Andrew Hunter, Senior U.S. Economist at Capital Economics, predicted the surge in energy prices will be partly reversed in April and said he expects energy inflation to decline significantly over the rest of this year.

Meanwhile, the report showed core consumer prices, which exclude food and energy prices, edged up by 0.3 percent in March after rising by 0.5 percent in February. Economists had expected another 0.5 percent increase.

The annual rate of consumer price growth accelerated to 8.5 percent in March from 7.9 percent in February, showing the fastest growth since December 1981.

Core consumer prices were up 6.5 percent year-over-year in March, reflecting an uptick from the 6.4 percent jump in February. The annual growth represents the biggest increase since August 1982.

“The surge in energy prices helped drive headline CPI inflation up to a new 40-year high of 8.5% in March but, with base effects set to become much more favorable and signs that monthly gains in core prices are moderating, we expect that to mark the peak,” said Hunter.

Sector News

Energy stocks continue to see substantial strength amid a rebound by the price of crude oil, with crude for May delivery spiking $6.56 to $100.85 a barrel after plunging $3.97 to $94.29 a barrel on Monday.

Reflecting the strength in the energy sector, the Philadelphia Oil Service Index is up by 4.1 percent and the NYSE Arca Oil Index is up by 2.9 percent.

Significant strength also remains visible among steel stocks, as reflected by the 2 percent jump by the NYSE Arca Steel Index.

Gold, semiconductor and networking stocks are also seeing notable strength on the day, moving higher along with most of the other major sectors.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region turned in a mixed performance during trading on Tuesday. Japan’s Nikkei 225 Index dove by 1.8 percent, while China’s Shanghai Composite Index jumped by 1.5 percent.

Meanwhile, the major European markets all moved to the downside on the day. While the French CAC 40 Index dipped by 0.3 percent, the German DAX Index and the U.K.’s FTSE 100 Index fell by 0.5 percent and 0.6 percent, respectively.

In the bond market, treasuries have pulled back off their best levels of the day but remain in positive territory. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, is down by 6.8 basis points at 2.712 percent.

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