Stocks Close Notably Lower On Disappointing Data, Iraq Worries - U.S. Commentary

(RTTNews) - Stocks moved notably lower over the course of the trading day on Thursday, extending the downward move seen in the previous session. Disappointing retail sales data weighed on the markets along with concerns about escalating violence in Iraq.

The major averages climbed off their lows going into the close but remained firmly negative. The Dow fell 109.69 points or 0.7 percent to 16,734.19, the Nasdaq slid 34.30 points or 0.8 percent to 4,297.63 and the S&P 500 dropped 13.78 points or 0.7 percent to 1,930.11.

The weakness on Wall Street was partly due to the release of a report from the Commerce Department showing that retail sales rose by less than expected in the month of May.

The Commerce Department said retail sales rose by 0.3 percent in May, while economists had been expecting sales to climb by about 0.6 percent.

Traders seemed to shrug off a notable upward revision to April sales, which rose by 0.5 percent compared to the 0.1 percent uptick originally reported for the month.

Peter Boockvar, managing director at the Lindsey Group, said, "Bottom line, the May miss relative to expectations was offset by the revision higher in April, thus leaving Q2 GDP estimates the same."

A report from the Labor Department showing an unexpected increase in weekly jobless claims also generated some negative sentiment.

The report said initial jobless claims edged up to 317,000 in the week ended June 7th from the previous week's revised level of 313,000. Economists had expected jobless claims to dip to 310,000.

Geopolitical concerns also weighed on the markets amid news that Islamic militants have seized control of two major cities in Iraq and are on the march toward Baghdad.

The news contributed to a sharp increase by the price of crude oil, with crude for July delivery surging up by $2.13 to $106.53 a barrel.

President Barack Obama said his national security team is looking at all options to address the situation and aid the Iraqi government.

Sector News

After helping to lead the markets lower on Wednesday, airline stocks once again saw substantial weakness on the day. The NYSE Arca Airline Index plummeted by 3.1 percent, pulling back further off last Friday's twelve-year closing high.

The continued weakness in the oil-sensitive airline sector was partly due to the jump by the price of crude oil in response to news out of Iraq.

Significant weakness was also visible among steel stocks, as reflected by the 1.8 percent loss posted by the NYSE Arca Steel Index. Mechel (MTL) and Cliffs Natural Resources (CLF) turned in two of the sector's worst performances.

Retail sales also saw considerable weakness on the heels of the disappointing data, dragging the Dow Jones Retail Index down by 1.4 percent. Electronics retailer RadioShack (RSH) helped to lead the sector lower, tumbling by 10.2 percent.

Railroad, defense, and computer hardware stocks also saw notable weakness on the day, while gold stocks bucked the downtrend once again amid an increase by the price of the precious metal.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved mostly lower during trading on Thursday. Japan's Nikkei 225 Index fell by 0.6 percent, while Hong Kong's Hang Seng Index ended the day down by 0.4 percent.

Meanwhile, the major European markets turned in a lackluster performance on the day and closed nearly flat. While the U.K.'s FTSE 100 Index inched up by 0.1 percent, the French CAC 40 Index closed just below the unchanged line and the German DAX Index dipped by 0.1 percent.

In the bond market, treasuries moved notably higher in reaction to a strong thirty-year bond auction. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, fell by 5.4 basis points to 2.586 percent.

Looking Ahead

While further developments in Iraq may attract attention on Friday, traders are also likely to likely to keep an eye on the release of a pair of reports on producer price inflation and consumer sentiment.

Trading could also be impacted by news that semiconductor giant Intel (INTC) raised its second quarter and full-year guidance after the close today's trading.