Stocks Extend Downtrend After Early Buying Interest Fades - U.S. Commentary

(RTTNews) - After failing to sustain an early upward move, stocks moved mostly lower over the course of the trading day on Thursday. The losses on the day extended the recent downward trend by the markets, with the Dow falling to a three-month closing low.

The major averages climbed off their worst levels going into the close but remain firmly negative. The Dow fell 75.07 points or 0.5 percent to 16,368.27, the Nasdaq slid 20.08 points or 0.5 percent to 4,334.97 and the S&P 500 dropped 10.67 points or 0.6 percent to 1,909.57.

The early strength on Wall Street partly reflected a positive reaction to a report from the Labor Department showing an unexpected decrease in initial jobless claims in the week ended August 2nd.

The Labor Department said initial jobless claims fell to 289,000, a decrease of 14,000 from the previous week's revised level of 303,000.

The drop came as a surprise to economists, who had expected jobless claims to edge up to 305,000 from the 302,000 originally reported for the previous week.

However, while the report provided another positive sign for the labor market, the data also fueled further speculation about the Federal Reserve raising interest sooner than anticipated.

Peter Boockvar, chief market analyst at the Lindsey Group, said, "For the Fed, today's data point is another figure pointing out how far behind the reality of the data they are falling."

The downturn by stocks also reflected concerns about the impact of the latest developments regarding the conflict in Ukraine.

In response to sanctions from the U.S. and Europe, Russian President Vladimir Putin signed an executive order Wednesday instituting a one-year ban on imports of certain food and agricultural products.

Although Russia has imposed such bans on nations in the past, they have been on the grounds of public health concerns.

It is estimated that Russia's annual imports of fruit and vegetables from the European Union amount to almost 2 billion euros. Russia also buys about 1 billion euros worth of food and agricultural products from the U.S.

In remarks following the European Central Bank's monetary policy decision, ECB President Mario Draghi acknowledged that the dispute with Russia could hurt economic growth.

Sector News

Extending a recent downward trend, airline stocks moved sharply lower over the course of the trading day. The NYSE Arca Airline Index tumbled by 1.9 percent to its lowest closing level in well over two months.

Copa Holdings (CPA) helped lead the airline sector lower, with the parent of Copa Airlines plunging by 15.6 percent after providing disappointing guidance.

Semiconductor stocks also saw significant weakness on the day, dragging the Philadelphia Semiconductor Index down by 1.4 percent. The index also fell to a two-month closing low.

Pharmaceutical, healthcare provider and steel stocks also came under considerable selling pressure, moving lower along with most of the other major sectors.

Meanwhile, bargain hunting contributed to some strength in the utilities sector, with the Philadelphia Utility Sector Index rising by 1.1 percent after ending the previous session at a nearly five-month closing low.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved mostly lower on Thursday. Hong Kong's Hang Seng Index dropped by 0.8 percent, while Australia's All Ordinaries Index edged down by 0.1 percent. However, Japan's Nikkei 225 Index bucked the downtrend and rose by 0.5 percent.

Meanwhile, the major European markets all moved to the downside on the day. While the U.K.'s FTSE 100 Index fell by 0.6 percent, the German DAX Index slumped by 1 percent and the French CAC 40 Index tumbled by 1.4 percent.

In the bond market, treasuries moved notably higher, adding to the gains posted over the past few sessions. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, fell by 5 basis points to a one-year closing low of 2.424 percent.

Looking Ahead

While developments overseas are likely to remain in focus on Friday, trading could also be impacted by the release of a report on labor productivity and costs.

On the earnings front, CBS (CBS), DeVry (DV), News Corp. (NWSA), Nvidia (NVDA), and Zynga (ZNGA) are among the companies releasing their quarterly results after the close of today's trading.