Stocks Close Notably Lower As Deutsche Bank Tumbles - U.S. Commentary

(RTTNews) - After initially showing a lack of direction, stocks came under pressure over the course of the trading session on Thursday. With the pullback on the day, the major averages partly offset the gains posted in the two previous sessions.

The major averages ended the day firmly in negative territory but off their lows of the session. The Dow tumbled 195.79 points or 1.1 percent to 18,143.45, the Nasdaq slid 49.39 points or 0.9 percent to 5,259.15 and the S&P 500 fell 20.24 points or 0.9 percent to 2,151.13.

The weakness on Wall Street was partly due to a steep drop by shares of Deutsche Bank (DB), which fell sharply after Bloomberg reported that several hedge funds have withdrawn excess cash and positions held at the lender.

Bloomberg called the move a sign of mounting concerns about doing business with Europe's largest investment bank.

Deutsche Bank, which have been under pressure amid news of billions of dollars in fines from the Justice Department, plummeted by 6.7 percent to a record closing low.

On the U.S. economic front, the Commerce Department released a report before the start of trading showing stronger than previously estimated GDP growth in the second quarter.

The report said second quarter GDP climbed by 1.4 percent compared to the previously reported 1.1 percent increase. Economists had expected the pace of GDP growth to be upwardly revised to 1.3 percent.

The Commerce Department said the stronger than previously estimated growth primarily reflected upward revisions to non-residential fixed investment, private inventory investment, and exports.

A separate report from the Labor Department showed a smaller than expected increase in initial jobless claims in the week ended September 24th.

The Labor Department said initial jobless claims edged up to 254,000, an increase of 3,000 from the previous week's revised level of 251,000. Economists had expected jobless claims to climb to 260,000.

Meanwhile, the National Association of Realtors released a report showing a sharp pullback in pending home sales in the month of August.

NAR said its pending home sales index tumbled by 2.4 percent to 108.5 in August after surging up by 1.2 percent to a revised 111.2 in July. Economists had expected pending sales to come in roughly flat.

A pending home sale is one in which a contract was signed but not yet closed. Normally, it takes four to six weeks to close a contracted sale.

Sector News

Adding to the losses posted in the previous session, biotechnology stocks showed a significant move to the downside on the day. Reflecting the weakness in the sector, the NYSE Arca Biotechnology Index slumped by 2.7 percent.

Alnylam Pharmaceuticals (ALNY) and Novavax (NVAX) turned in two of the biotech sector's worst performances, tumbling by 8.8 percent and 6.4 percent, respectively.

Significant weakness was also visible among pharmaceutical stocks, as reflected by the 2.3 loss posted by the NYSE Arca Pharmaceutical Index. With the drop, the index fell to a three-month closing low.

The sharp decline by Deutsche Bank also weighed on the banking sector, resulting in a 1.6 percent drop by the Dow Jones Banks Index.

Steel, utilities, and commercial real estate stocks also saw notable weakness on the day, while considerable strength was visible among telecom, oil service, and semiconductor stocks.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved mostly higher during trading on Thursday. Japan's Nikkei 225 Index surged up by 1.4 percent, while Hong Kong's Hang Seng Index advanced by 0.5 percent.

Meanwhile, the major European markets turned in a mixed performance on the day. While the German DAX Index fell by 0.3 percent, the French CAC 40 Index rose by 0.3 percent and the U.K.'s FTSE 100 Index jumped by 1 percent.

In the bond market, treasuries turned higher over the course of the session after seeing early weakness. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, edged down by 1 basis point to 1.557 percent.

Looking Ahead

Trading on Friday may be impacted by reaction to reports on personal income and spending, consumer sentiment, and Chicago-area business activity.