Stocks Stage Recovery After Moving Lower At The Open - U.S. Commentary

(RTTNews) - After moving to the downside at the open, stocks have turned mostly positive over the course of early trading on Tuesday. The major averages have bounced well off their lows for the young session and climbed modestly above the unchanged line.

Currently, the major averages are posting modest gains, near their best levels of the day. The Dow is up 24.02 points or 0.1 percent at 16,805.03, the Nasdaq is up 19.38 points or 0.5 percent at 4,340.48 and the S&P 500 is up 3.43 points or 0.2 percent at 1,941.21.

The initial weakness on Wall Street partly reflected a negative reaction to a pair of U.S. economic reports showing a bigger than expected drop in housing starts and a bigger than expected increase in consumer prices.

The Commerce Department released a report before the start of trading showing that housing starts pulled back by more than expected in the month of May after surging higher in the previous month.

The report said housing starts fell 6.5 percent to an annual rate of 1.001 million in May after jumping 12.7 percent to a rate of 1.071 million in April. Economists had expected starts to drop to a rate of 1.030 million.

A separate report from the Labor Department showed that consumer prices rose at their fastest pace in over a year in the month of May.

The consumer price index rose by 0.4 percent in May, the biggest monthly increase since February of 2013. Economists had expected consumer prices to edge up by about 0.2 percent.

Core consumer prices, which exclude food and energy prices, increased 0.3 percent in May after rising by 0.2 percent in the previous month. Core prices had also been expected to tick up by 0.2 percent.

Worries about the ongoing conflict in Iraq also weighed on the markets amid news that Sunni insurgents continue to advance toward Baghdad.

Nonetheless, selling pressure waned not long after the start of trading, as traders seemed reluctant to make significant moves ahead of the Federal Reserve's monetary policy announcement Wednesday afternoon.

While the Fed is widely expected to announce another $10 billion reduction in the pace of asset purchases, traders are likely to focus more on the language of the accompanying statement and the outlook for interest rates.

The subsequent recovery by the markets is partly due to strength that has emerged among brokerage stocks. The NYSE Arca Broker/Dealer Index has surged up by 1.6 percent amid strong gains by E*Trade (ETFC) and Charles Schwab (SCHW).

Banking, internet, and airline stocks have also moved to the upside, although buying interest has remained somewhat subdued.

In overseas trading, stock markets across the Asia-Pacific region turned in another mixed performance during trading on Tuesday. Japan's Nikkei 225 Index rose by 0.3 percent, while Hong Kong's Hang Seng Index dropped by 0.4 percent.

Meanwhile, the major European markets have all moved to the upside on the day. While the U.K.'s FTSE 100 Index has edged up by 0.1 percent, the German DAX Index and the French CAC 40 Index are up by 0.3 percent and 0.4 percent, respectively.

In the bond market, treasuries have come under pressure amid concerns about the outlook for inflation. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, is up by 4.9 basis points at 2.646 percent.