Stocks Fall Sharply As End Of QE Looms On Horizon - U.S. Commentary

(RTTNews) - Stocks showed a substantial move to the downside over the course of the trading day on Thursday, more than offsetting the gains posted in the previous session. The sharp pullback dragged all three major averages down to their lowest closing levels in over a month.

The major averages saw further downside going into the close, ending the day at their lows for the session. The Dow tumbled 264.26 points or 1.5 percent to 16,945.80, the Nasdaq plummeted 88.47 points or 1.9 percent to 4,466.75 and the S&P 500 plunged 32.31 points or 1.6 percent to 1,965.99.

The sell-off on Wall Street came as traders seemed to be cashing in on some of the recent strength in the markets amid lingering concerns about the outlook for monetary policy.

With the Federal Reserve poised to bring its asset purchase program to a close next month, traders know it is likely only a matter of time before the central bank starts hiking interest rates.

In a research note, Peter Boockvar, chief market analyst at the Lindsey Group, once again pointed the looming end of quantitative easing for the weakness in the markets.

"U.S. growth, while improving over the past few quarters, is still on track for 2-2.25% growth this year versus 2.2% last year, and the earnings gains are also similar," Boockvar said.

H added, "QE has proven to be just a bubble blowing exercise, and as I mentioned yesterday, lunch is free when QE is on and it's not when QE is off, especially one that had an annualized run rate of $1 trillion."

A notable decline by shares of Apple (AAPL) also weighed on the markets, with the tech giant tumbling by 3.8 percent to a one-month closing low.

The drop by Apple came after the company pulled its iOS 8.0.1 update after receiving numerous complaints from iPhone 6 and iPhone 6 Plus users about drops in cellular service.

Geopolitical concerns also generated some selling pressure amid the expanding conflict in the Middle East as well as reports that Russia is considering a law that would allow their courts to seize foreign assets in response to Western sanctions.

Meanwhile, the Labor Department released a report before the start of trading showing a modest rebound in initial jobless claims in the week ended September 20th.

A separate report from the Commerce Department showed a sharp pullback in durable goods orders in August following the substantial increase seen in July, reflecting volatility in commercial aircraft orders.

Sector News

With Apple leading the way lower, substantial weakness was visible among computer hardware stocks. Reflecting the weakness in the sector, the NYSE Arca Computer Hardware Index plunged by 2.7 percent to a two-month closing low.

EMC Corp. (EMC) and NetApp (NTAP) posted notable losses along with Apple, falling by 3.1 percent and 2.8 percent, respectively.

Steel stocks also extended a recent downward move amid concerns about global demand, dragging the NYSE Arca Steel Index down by 2.5 percent. With the drop, the index ended the session at its worst closing level in six months.

Software, internet, and networking stocks also saw significant weakness, contributing to the sharp loss posted by the tech-heavy Nasdaq.

Most of the other major sectors also came under pressure on the day, with natural gas, banking, telecom and oil service posting notable losses.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region turned in yet another mixed performance on Thursday. Japan's Nikkei 225 Index surged up by 1.3 percent, while Hong Kong's Hang Seng Index fell by 0.6 percent.

Meanwhile, the major European markets all came under pressure on the day. While the U.K.'s FTSE 100 Index slumped by 1 percent, the French CAC 40 Index and the German DAX Index tumbled by 1.3 percent and 1.6 percent, respectively.

In the bond market, treasuries showed a strong move back to the upside amid the sell-off by stocks. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, fell by 5.8 basis points to 2.511 percent.

Looking Ahead

Trading on Friday could be impacted by the final reading on second quarter GDP as well as a report on consumer sentiment.

Shares of Nike (NKE) may also be in focus, as the athletic apparel giant is releasing its fiscal first quarter results after the close of today's trading.