Geopolitical Concerns Lead To Sell-Off On Wall Street - U.S. Commentary

(RTTNews) - With geopolitical concerns generating considerable selling pressure, stocks moved sharply lower over the course of the trading day on Thursday. The losses on the day more than offset yesterday's gains, with the Dow pulling back well off its record closing high.

The major averages closed firmly in negative territory but off their lows for the session. The Dow dove 161.39 points or 0.9 percent to 16,976.81, the Nasdaq plunged 62.52 points or 1.4 percent to 4,363.45 and the S&P 500 tumbled 23.45 points or 1.2 percent to 1,958.12.

The sell-off on Wall Street was largely due to worries about the latest developments overseas, including news that a Malaysia Airlines passenger plane crashed in eastern Ukraine.

Media reports indicated that the plane flying from Amsterdam to Kuala Lumpur with 295 people on board crashed near the Ukraine-Russia border.

The reports of a crash in an area where the Ukrainian government has been fighting pro-Russian rebels have led to speculation that the plane was shot down.

Later in the day, news that Israeli forces have launched a ground offensive in Gaza exerted further downward pressure on the markets.

The news came as the markets were already on edge due to concerns about the economic impact of new sanctions against Russia.

Citing continued attempts to destabilize Ukraine, the U.S. imposed a broad-based package of sanctions on entities in the Russian financial services, energy, and defense sectors.

Peter Boockvar, chief market analyst at the Lindsey Group, described the sanction news as a convenient excuse to sell stocks, suggesting that the continued highs by the major averages are hiding the tenuous internals of the U.S. stock market.

A disappointing report on new residential construction in the U.S. also weighed on the markets, with housing starts falling to a nine-month low.

The Commerce Department said housing starts tumbled 9.3 percent to an annual rate of 893,000 in June, while economists had expected starts to climb to 1.02 million

Meanwhile, traders shrugged off a separate report from the Philadelphia Federal Reserve showing a notable acceleration in the pace of growth in Philadelphia-area manufacturing activity.

Sector News

Airline stocks showed a substantial move to the downside following the news of the plane crash in Ukraine. Reflecting the weakness in the sector, the NYSE Arca Airline Index plummeted by 2.7 percent.

Brazil's GOL (GOL) and American Airlines (AAL) turned in two of the airline sector's worst performances, falling by 7 percent and 4.1 percent, respectively.

Considerable weakness also emerged among natural gas stocks, as reflected by the 2.6 percent loss posted by the NYSE Arca Natural Gas Index. The weakness in the sector came as natural gas for August delivery fell $0.165 to $3.954 per million BTUs.

Semiconductor stocks also saw significant weakness on the day, dragging the Philadelphia Semiconductor Index down by 2.5 percent. SanDisk (SNDK) helped lead the sector lower after reporting better than expected second quarter earnings but providing disappointing revenue guidance.

Biotechnology, housing, steel, and computer hardware stocks also moved notably lower, reflecting broad based selling pressure.

Meanwhile, gold stocks bucked the downtrend by the broader markets, moving higher along with the price of the precious metal. With gold for August delivery climbing $17.10 to $1,316.90 an ounce, the NYSE Arca Gold Bugs Index jumped 2.5 percent.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region turned in another mixed performance during trading on Thursday. Japan's Nikkei 225 Index edged down by 0.1 percent, while Australia's All Ordinaries Index crept up by 0.1 percent.

Meanwhile, the major European markets all moved back to the downside following yesterday's rally. While the U.K.'s FTSE 100 Index dropped by 0.7 percent, the German DAX Index and the French CAC 40 Index tumbled by 1.1 percent and 1.2 percent, respectively.

In the bond market, treasuries moved notably higher amid concerns about the news from overseas. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, fell by 6.3 basis points to a one-month closing low of 2.475 percent.

Looking Ahead

Trading on Friday could be impacted by further developments overseas as well as the release of U.S. reports on consumer sentiment and leading economic indicators.

Earnings news is also likely to be in focus, as tech giants Google (GOOG) and IBM (IBM) are among the companies releasing their quarterly results after the close of today's trading.

General Electric (GE) and Honeywell (HON) are also due to report their quarterly results before the start of trading on Friday.