Sell-Off On Wall Street Drags Dow To Two-Month Low - U.S. Commentary

(RTTNews) - After moving sharply lower at the open, stocks have seen some further downside over the course of the trading day on Thursday. With the steep losses on the day, the Dow has fallen to its lowest intraday level in two months.

The major averages have climbed off their worst levels in the past few minutes but continue to post steep losses. The Dow is down 203.39 points or 1.2 percent at 16,676.97, the Nasdaq is down 81.49 points or 1.8 percent at 4,381.41 and the S&P 500 is down 29.11 points or 1.5 percent at 1,940.96.

The sell-off on Wall Street partly reflects lingering geopolitical concerns amid the ongoing conflicts in Ukraine and Gaza as well as news that Argentina missed a debt payment.

A report showing that Eurozone inflation slowed to the lowest level in four-and-a-half years in July also raised concerns about the risk of deflation.

Traders have also reacted negatively to a report from the Labor Department showing that U.S. employee compensation costs increased by more than expected in the second quarter.

The report said compensation costs increased by 0.7 percent in the second quarter, reflecting the fastest rate of growth since the third quarter of 2008. Economists had been expecting a 0.5 percent increase.

The bigger than expected increase in compensation costs has further fueled speculation that the Federal Reserve could begin raising interest rates sooner than previously anticipated.

A separate report from the Labor Department showed that initial jobless claims saw a notable rebound in the week ended July 26th.

The report said initial jobless claims climbed to 302,000, an increase of 23,000 from the previous week's revised level of 279,000. Economists had expected jobless claims to rise to 301,000.

The previous week's revised level represents the lowest number of jobless claims since May of 2000, when claims hit 276,000.

Following the jobless claims data, traders are likely looking ahead to the release of the Labor Department's more closely watched monthly jobs report on Friday.

MNI Indicators also released a report showing a substantial slowdown in the pace of growth in Chicago-area business activity in the month of July.

Sector News

Most of the major sectors have shown notable moves to the downside on the day, reflecting broad based selling pressure on Wall Street.

Networking stocks continue to see substantial weakness in mid-day trading, with the NYSE Arca Networking Index tumbling by 2.7 percent. Alcatel-Lucent (ALU) is leading the sector lower after reporting disappointing second quarter results.

Considerable weakness also remains visible among biotechnology stocks, as reflected by the 2.6 percent loss being posted by the NYSE Arca Biotechnology Index. Nektar Therapeutics (NKTR) and Incyte (INCY) are posting particularly steep losses on the day.

Defense stocks have also shown a significant move to the downside, dragging the Philadelphia Defense Sector Index down by 2.4 percent to a three-month low.

Within the defense sector, L-3 Communications (LLL) has plunged by 16.3 percent after reporting weaker than expected second quarter earnings.

Oil service, semiconductor, computer hardware, and telecom stocks are also seeing notable weakness in mid-day trading.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region turned in another mixed performance during trading on Thursday. Japan's Nikkei 225 Index edged down by 0.2 percent, while Hong Kong's Hang Seng Index ticked up by 0.1 percent.

Meanwhile, the major European markets all moved to the downside on the day. While the U.K.'s FTSE 100 Index dropped by 0.6 percent, the French CAC 40 Index and the German DAX Index tumbled by 1.5 percent and 1.9 percent, respectively.

In the bond market, treasuries have climbed back near the unchanged after seeing initial weakness. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, is down by less than a basis point at 2.549 percent.