Stocks Accelerate To The Downside After Disappointing Data - U.S. Commentary

(RTTNews) - After moving moderately lower early in the session, stocks have seen further downside over the course of the trading day on Thursday. Disappointing service sector data is weighing on the markets along with the ongoing government shutdown.

The major averages are currently posting steep losses, near their worst levels of the day. The Dow is down 166.93 points or 1.1 percent at 14,966.21, the Nasdaq is down 51.60 points or 1.4 percent at 3,763.42 and the S&P 500 is down 20.41 points or 1.2 percent at 1,673.46.

Selling pressure picked up in morning trading following the release of a report from the Institute for Supply Management showing a bigger than expected slowdown in the pace of service sector growth.

The ISM said its non-manufacturing index dropped to 54.4 in September from 58.6 in August. While a reading above 50 indicates continued growth in the service sector, economists had expected the index to show a much more modest decrease to a reading of 57.0.

Anthony Nieves, chair of the ISM Non-Manufacturing Business Survey Committee, said, "The majority of the respondents' comments continue to be positive; however, there is an increase in the degree of uncertainty regarding the future business climate and the direction of the economy."

The weakness on Wall Street also reflects concerns about the economic impact of a prolonged government shutdown amid continued signs of intransigence among lawmakers from both parties.

President Barack Obama met with Congressional leaders Wednesday night, but the meeting did not seem to make much progress toward a compromise on a temporary spending bill.

While the White House said Obama made clear that he will not negotiate over the need for Congress to act to reopen the government, House Speaker John Boehner, R-Ohio, continued to call for Democrats to agree to delay the implementation of certain provisions of the healthcare reform law.

Meanwhile, traders have largely shrugged off a report from the Labor Department showing a smaller than expected increase in initial jobless claims in the week ended September 28th.

The report said initial jobless claims inched up to 308,000, an increase of 1,000 from the previous week's revised figure of 307,000. Economists had been expecting initial jobless claims to climb to 315,000 from the 305,000 originally reported for the previous week.

The latest data came from before the government shutdown, which could have a negative impact on the labor market if lawmakers are not able to reach a compromise in the near future.

Sector News

While most of the major sectors have come under pressure on the day, housing stocks have shown a substantial move to the downside. Reflecting the weakness in the sector, the Philadelphia Housing Sector Index has tumbled by 1.9 percent.

Vulcan Materials (VMC) and Ryland Group (RYL) are turning in two of the housing sector's worst performances, falling by 3.2 percent and 2.7 percent, respectively.

Significant weakness has also emerged among trucking stocks, as reflected by the 1.9 percent loss being posted by the Dow Jones Trucking Index. YRC Worldwide (YRCW) and Ryder (R) are posting notable losses in mid-day trading.

Defense stocks are also seeing considerable weakness, adding to the losses posted in the previous session. The Philadelphia Defense Sector Index is down by 1.7 percent, at its worst level in almost a month.

Commercial real estate, brokerage, and biotechnology stocks have also come under pressure, moving to the downside along with most of the other major sectors.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved mostly higher on Thursday. Hong Kong's Hang Seng Index advanced by 1 percent and Australia's All Ordinaries Index rose by 0.3 percent. However, Japan's Nikkei 225 Index bucked the uptrend once again, edging down by 0.1 percent.

Meanwhile, the major European markets turned in a mixed performance. While the U.K.'s FTSE 100 Index inched up by 0.2 percent, the German DAX Index fell by 0.4 percent and the French CAC 40 Index slumped by 0.7 percent.

In the bond market, treasuries have turned higher on the day after seeing initial weakness. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, is down by 2.7 basis points at 2.599 percent.