Global Growth Worries Weigh On Wall Street - U.S. Commentary

(RTTNews) - After ending the previous session nearly unchanged, stocks moved mostly lower over the course of the trading session on Wednesday. Renewed concerns about the outlook for the global economy weighed on the markets.

The major averages climbed off their worst levels late in the day but still closed in the red. The Dow fell 102.04 points or 0.6 percent to 16,843.88, the Nasdaq edged down 6.06 points or 0.1 percent to 4,331.93 and the S&P 500 slid 6.90 points or 0.4 percent to 1,943.89.

The weakness on Wall Street was partly due to news that the World Bank lowered its global economic growth forecast for 2014.

Citing poor weather in the U.S., financial market turbulence and the Ukrainian crisis, the World Bank said it now expects the global economy to grow by 2.8 percent in 2014 compared to its previous forecast for 3.2 percent growth.

At the same time, the World Bank left its growth forecasts for 2015 and 2016 broadly unchanged at 3.4 percent and 3.5 percent, respectively.

Some traders also took the opportunity to cash in the on the recent strength in the markets, which lifted the Dow and the S&P 500 to record highs and the Nasdaq to its best levels in three months.

Peter Boockvar, chief market analyst at the Lindsey Group, noted that a survey by Investors Intelligence showed bullish sentiment among financial advisors at a level than often precedes sizable corrections.

"Thus, if history is any guide, we're either on the cusp of a bear market or a trading range market for 6-12 months rather than further gains of substance," Boockvar said.

He added, "Most of the time sentiment doesn't say much about short term performance but when the spread between bulls and bears gets this wide, it's historically noteworthy and foolhardy to ignore."

The day's negative sentiment was also attributed to concerns about further gridlock in Washington after House Majority Leader Eric Cantor, R-Virg., lost the Republican primary in Virginia's 7th Congressional District to Tea Party-backed challenger David Brat.

Political observers have suggested that Cantor's defeat makes it increasingly unlikely that Congress will pass immigration reform or any other meaningful legislation this year.

Sector News

Pulling back further off their recent highs, airline stocks saw substantial weakness on the day. The NYSE Arca Airline Index tumbled by 2.3 percent, moving lower for the third consecutive session after setting a twelve-year closing high last Friday.

United Continental (UAL) and Hawaiian Holdings (HA) turned in two of the airline sector's worst performances, falling by 5.2 percent and 4.1 percent, respectively.

Considerable weakness was also visible among housing stocks, as reflected by the 1.4 percent loss posted by the Philadelphia Housing Sector Index. With the loss, the index pulled back further off Monday's three-month closing high.

Utilities, financial, and defense stocks also saw significant weakness on the day, while gold stocks bucked the downtrend amid a modest increase by the price of the precious metal.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region turned in another mixed performance during trading on Wednesday. Japan's Nikkei 225 Index rose by 0.5 percent, while Hong Kong's Hang Seng Index dipped by 0.3 percent.

Meanwhile, the major European markets all moved to the downside on the day. While the U.K.'s FTSE 100 Index fell by 0.5 percent, the German DAX Index and the French CAC 40 Index dropped by 0.8 percent and 0.9 percent, respectively.

In the bond market, treasuries pulled back near the unchanged line following the Treasury Department's ten-year note auction. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its prices, edged up by less than a basis point to 2.64 percent.

Looking Ahead

Following several quiet days, the economic calendar picks up on Thursday with the release of reports on weekly jobless claims, retail sales, import and export prices, and business inventories.