Stocks Recover From Early Sell-Off But Still Close In The Red - U.S. Commentary

(RTTNews) - After showing a substantial move to the downside at the start of trading on Thursday, stocks regained some ground over the course of the session. The major averages climbed well off their worst levels of the day but remained stuck in negative territory.

With the losses on the day, the major averages largely offset yesterday's gains. The Dow fell 70.54 points or 0.4 percent to 16,915.07, the Nasdaq slid 22.83 points or 0.5 percent to 4,396.20 and the S&P 500 dropped 8.15 points or 0.4 percent to 1,964.68.

The initial sell-off on Wall Street was partly due to renewed concerns about the financial situation in Europe, which resurfaced following several quiet months.

News that the parent company of Portugal's Banco Espirito Santo has missed short-term debt payments led to the latest worries despite assurances that the bank is protected.

Concerns about the prospect of the Federal Reserve raising interest rate sooner than anticipated also weighed on the markets following the release of upbeat jobs data.

On the heel of last week's strong monthly jobs report, the Labor Department released a separate report showing an unexpected drop in initial jobless claims in the week ended July 5th.

The report said initial jobless claims fell to 304,000, a decrease of 11,000 from the previous week's unrevised level of 315,000. Economists had expected claims to come in unchanged compared to the previous week.

In an interview with Bloomberg, St. Louis Federal Reserve President James Bullard suggested that the rapid drop in the unemployment rate is likely to push inflation well above the central bank's target.

Bullard, a policy hawk, said the Fed could subsequently face increased pressure to raise the main interest rate sooner than most officials have estimated.

Despite the recovery attempt by the broader markets, shares Potbelly (PBPB) saw substantial weakness after the sandwich chain warned of weaker than expected second quarter results.

Flooring materials retailer Lumber Liquidators (LL) also posted steep loss on the day after cutting its full-year earnings forecast.

On the other hand, shares of Zumiez (ZUMZ) showed a strong move to the upside after the sports apparel retailer raised its second quarter earnings guidance.

Sector News

After bucking the early downtrend by the broader markets, gold stocks showed a substantial turnaround over the course of the trading day. The NYSE Arca Gold Bugs Index tumbled by 1.8 percent after reaching its best intraday level in well over three months.

The downturn by gold stocks came despite a notable increase by the price of the precious metal, as gold for August delivery climbed $14.90 to $1,339.20 an ounce.

Steel stocks saw significant weakness throughout the session, resulting in a 1.4 percent drop by the NYSE Arca Steel Index. With the loss, the index pulled back further off the six-month closing high it set a week ago.

Considerable weakness was also visible among oil service stocks, as reflected by the 1.3 percent loss posted by the Philadelphia Oil Service Index. Tidewater (TDW) and Oceaneering (OII) posted steep losses on the day.

Brokerage, trucking, railroad, and housing stocks also saw notable weakness, while strength that emerged among airline and computer hardware stocks contributed to the recovery attempt by the broader markets.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region turned in a mixed performance during trading on Thursday. Japan's Nikkei 225 Index dropped by 0.6 percent, while Hong Kong's Hang Seng Index rose by 0.3 percent.

Meanwhile, the major European markets all came under pressure on the day. While the U.K.'s FTSE 100 Index fell by 0.7 percent, the French CAC 40 Index and the German DAX Index tumbled by 1.3 percent and 1.5 percent, respectively.

In the bond market, treasuries gave back some ground after seeing early strength but still closed modestly higher. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, edged down by 1.5 basis points to 2.532 percent after hitting a one-month low of 2.494 percent.

Looking Ahead

Amid another quiet day on the U.S. economic front, trading on Friday may be impacted by remarks by Philadelphia Fed President Charles Plosser, Chicago Fed President Charles Evans and Atlanta Fed President Dennis Lockhart.

On the earnings front, financial giant Wells Fargo (WFC) is among the companies due to report their quarterly results before the start of trading on Friday.