U.S. Stocks Pull Back Sharply As Early Buying Interest Fades

(RTTNews) - Stocks showed a substantial downturn over the course of the trading session on Thursday, with the major averages pulling back sharply after showing a strong move to the upside in early trading. With the steep drop on the day, the Nasdaq fell to its lowest closing level in over a month.

After jumping by more than 330 points to a two-month intraday high, the Dow slumped 368.03 points or 1.1 percent to 34,792.76. The Nasdaq also plunged 278.41 points or 2.1 percent to 13,174.65, and the S&P 500 tumbled 65.79 points or 1.5 percent at 4,393.66.

The sharp pullback on Wall Street came as Treasury yields showed a notable move back to the upside after giving back ground on Wednesday.

The yield on the benchmark ten-year note more than offset yesterday's drop, reaching its highest closing level since December 2018.

Concerns about the outlook for interest rates contributed to the rebound by Treasury yields, with traders keeping an eye on comments by Federal Reserve Chair Jerome Powell.

Participating in an International Monetary Fund panel, Powell said he believes it would be appropriate to raise rates "a little more quickly" and predicted a 50 basis point rate hike would be on the table at the Fed's May meeting.

"Our goal is to use our tools to get demand and supply back in synch, so that inflation moves down and does so without a slowdown that amounts to a recession," Powell said.

"I don't think you'll hear anyone at the Fed say that that's going to be straightforward or easy," he added. "It's going to be very challenging. We're going to do our best to accomplish that."

CME Group's FedWatch Tool currently indicates that a 50 basis point rate hike at the May meeting is a near certainty.

Early in the session, stocks benefited from some upbeat earnings news, with shares of Tesla (TSLA) notably sharply higher after the electric car maker reported first quarter results that beat analyst estimates on both the top and bottom lines.

American Airlines (AAL) and United Airlines (UAL) also held on to strong gains after reporting first quarter losses but forecasting a return to profitability in the current quarter.

On the U.S. economic front, the Labor Department released a report showing a slight decrease in first-time claims for U.S. unemployment benefits in the week ended April 16th.

The report showed initial jobless claims edged down to 184,000, a decrease of 2,000 from the previous week's revised level of 186,000.

Economists had expected jobless claims to dip to 180,000 from the 185,000 originally reported for the previous week.

Meanwhile, a separate from the Federal Reserve Bank of Philadelphia showed growth in Philadelphia-area manufacturing activity slowed more than expected in the month of April.

The Philly Fed said its diffusion index for current activity slumped to 17.6 in April from 27.4 in March. While a positive reading still indicates growth, economists had expected the index to show a more modest drop to 21.0.

The Conference Board also released a report showing its reading on leading U.S. economic indicators increased in line with economist estimates in the month of March.

Sector News

Gold stocks moved sharply lower over the course of the session, dragging the NYSE Arca Gold Bugs Index down by 4.8 percent.

The sell-off by gold stocks came amid a decrease by the price of the precious metal, with gold for June delivery falling $7.40 to $1,948.20 an ounce.

Substantial weakness also emerged among energy stocks, which came under pressure even though the price of crude oil for June delivery jumped $1.60 to $103.79 a barrel.

Reflecting the weakness in the energy sector, the Philadelphia Oil Service Index and the NYSE Arca Oil Index plunged by 3.8 percent and 3.2 percent, respectively.

Steel, brokerage, semiconductor and networking stocks also moved sharply lower as the day progressed, while significant strength remained visible among airline stocks.

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 shot up by 1.2 percent, while China's Shanghai Composite Index plunged by 2.3 percent.

Meanwhile, European stocks moved mostly higher on the day, although the U.K.'s FTSE 100 Index underperformed and ended the day roughly flat. The German DAX Index jumped by 1 percent and the French CAC 40 Index surged up by 1.4 percent.

In the bond market, treasuries showed a notable move back to the downside following yesterday's rebound. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, climbed 7.7 basis points to a new three-year closing high of 2.917 percent.

Looking Ahead

Amid a quiet day on the U.S. economic front, earnings is likely to be in focus on Friday, with American Express (AXP) and Verizon (VZ) among the companies due to report their quarterly results before the start of trading