Stocks Extend Downtrend On Disappointing Earnings, Drop In Oil - U.S. Commentary

(RTTNews) - Stocks saw some volatility over the course of the trading session on Thursday but eventually ended the day firmly in negative territory. The losses on the day extended a recent downtrend, with the major averages closing lower for the fifth straight session.

The major averages finished the day at their lowest closing levels in about a month. The Dow slid 106.38 points or 0.6 percent to 17,320.71, the Nasdaq tumbled 68.50 points or 1.5 percent to 4,570.82 and the S&P 500 fell 18.60 points or 0.9 percent to 1,992.67.

The continued weakness on Wall Street partly reflected a negative reaction to quarterly results from financial giants Bank of America (BAC) and Citigroup (C).

Before the start of trading, Bank of America and Citigroup both reported weaker than expected fourth quarter earnings, raising concerns about the outlook for the remainder of earnings season.

A downturn by the price of crude oil also weighed on the markets, with crude for February delivery plunging $2.23 to $46.25 a barrel after surging up as much as $2.79 a barrel earlier in the day.

The pullback by the price of crude oil came as OPEC lowered its demand forecast for 2015 to 28.8 million barrels a day.

Traders were also digesting a slew of U.S. economic data as well as news that the Swiss National Bank scrapped its currency cap on the franc versus the euro and lowered interest rates deeper into negative territory.

The Labor Department released a report this morning showing that producer prices fell at their fastest rate in over three years in December, although the drop was still smaller than economists had expected.

The report said the producer price index for final demand fell by 0.3 percent in December, while economists had expected the index to decrease by 0.4 percent.

Excluding food and energy prices, the core producer price index rose by 0.3 percent in December after coming in unchanged in the previous month. The increase exceeded estimates for a 0.1 percent uptick.

The Labor Department also released a separate report showing that initial jobless claims jumped to their highest level in four months in the week ended January 10th.

Meanwhile, the New York and Philadelphia Federal Reserves released a pair of reports painting a mixed picture of activity in the manufacturing sector.

Sector News

While most of the major sectors ended the day lower, housing stocks showed a substantial move to the downside. The Philadelphia Housing Sector Index plummeted 3.5 percent, pulling back further off the seven-year closing high it set on Monday.

Lennar (LEN) helped to lead the housing sector lower, with the homebuilder tumbling by 7.2 percent after reporting better than expected fourth quarter earnings but forecasting a drop in margins.

Considerable weakness also emerged among oil service stocks, as reflected by the 3 percent loss posted by the Philadelphia Oil Service Index. With the loss, the index fell to its lowest closing level in well over three years.

Banking stocks also saw significant weakness on the day, dragging the Dow Jones Banks Index down by 2.4 percent. Bank of America and Citigroup turned in two of the sector's worst performances, falling by 5.2 percent and 3.7 percent, respectively.

Internet, networking, brokerage, and biotechnology stocks also came under pressure on the day, while gold stocks bucked the downtrend amid a sharp jump by the price of the precious metal.

Other Markets

In overseas trading, most stock markets across the Asia-Pacific moved back to the upside during trading on Thursday. Japan's Nikkei 225 Index surged up by 1.9 percent, while China's Shanghai Composite Index soared by 3.5 percent.

The major European markets also saw significant strength on the day. While the U.K.'s FTSE 100 Index jumped by 1.7 percent, the German DAX Index and the French CAC 40 Index surged up by 2.2 percent and 2.4 percent, respectively.

In the bond market, treasuries showed another strong upward move following the surprise move by the Swiss National Bank. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, fell by 6.2 basis points to 1.775 percent.

Looking Ahead

Another batch of U.S. economic data is scheduled to be released on Friday, with traders likely to keep an eye on reports on consumer prices, industrial production, and consumer sentiment.

Trading could also be impacted by reaction to earnings news from Intel (INTC), as the semiconductor giant is releasing its fourth quarter results after the close of today's trading.

Additionally, Goldman Sachs (GS) and Charles Schwab (SCHW) are among the companies due to release their quarterly results before the start of trading on Friday.