Sell-Off On Wall Street Erases Yesterday's Rally - U.S. Commentary

(RTTNews) - Stocks moved sharply lower over the course of the trading day on Thursday, extending the volatility seen over the past several sessions. The substantial pullback by the markets offset the rally that was seen in the previous session.

The major averages ended the day firmly in negative territory, near their lows for the session. The Dow plunged 334.97 points or 2 percent to 16,659.25, the Nasdaq tumbled 90.26 points or 2 percent to 4,378.34 and the S&P 500 plummeted 40.68 points or 2.1 percent to 1,928.21.

With the steep losses on the day, the major averages all ended the session at their worst closing levels in about two months.

The sell-off on Wall Street was partly due to profit taking following yesterday's rally, which reflected a positive reaction to the minutes of the latest Federal Reserve meeting.

The minutes of the September meeting were seen as offering a dovish outlook for monetary policy, as some Fed officials expressed concerns about global economic weakness and the impact of a stronger U.S. dollar.

However, some traders suggested that the rebound was overdone considering that the Fed still plans to wrap up its asset purchase program at its next meeting later this month.

Uncertainty about the impending earnings season also weighed on the markets, with a slew of big-name companies due to release their quarterly results starting next week.

Aluminum giant Alcoa (AA) kicked off the earnings season by reporting better than expected third quarter results after the close of trading on Wednesday, but the company's stock turned lower on the day.

Meanwhile, traders largely shrugged off a Labor Department report showing an unexpected drop in initial jobless claims in the week ended October 4th.

The report said initial jobless claims edged down to 287,000, a decrease of 1,000 from the previous week's revised level of 288,000. The modest decrease came as a surprise to economists, who had expected jobless claims to climb to 294,000.

Among individual stocks, shares of Gap (GPS) fell sharply on the day after the apparel retailer reported disappointing September sales and appointed a new CEO.

Chip maker Advanced Micro Devices (AMD) also came under pressure after naming Dr. Lisa Su to succeed Rory Read as its president and CEO.

On the other hand, shares of Ruby Tuesday (RT) bucked the downtrend after the restaurant operator reported a narrower than expected first quarter loss.

Sector News

Reflecting weakness in the broader resource sector, natural gas stocks showed a substantial move to the downside on the day. The NYSE Arca Natural Gas Index plummeted by 4.6 percent to its lowest closing level in almost nine months.

Chesapeake Energy (CHK) and Williams (WMB) turned in two of the natural gas sector's worst performances, tumbling by 7 percent and 6.8 percent, respectively.

Oil service stocks also saw substantial weakness, moving lower along with the price of crude oil. With crude for November delivery falling by $1.54 to a nearly two-year low of $85.77 a barrel, the Philadelphia Oil Service Index dove by 4.1 percent.

Outside of the resource sector, considerable weakness was also visible among networking stocks, as reflected by the 2.9 percent loss posted by the NYSE Arca Networking Index. Alcatel-Lucent (ALU) helped to lead the sector lower, plunging by 9.5 percent.

Semiconductor, railroad, chemical, and brokerage stocks also came under pressure on the day, reflecting broad based weakness on Wall Street.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved mostly higher on Thursday. Hong Kong's Hang Seng Index jumped by 1.2 percent, while Australia's All Ordinaries Index surged up by 1 percent. However, Japan's Nikkei 225 Index bucked the uptrend and fell by 0.8 percent.

Meanwhile, the major European markets turned in a mixed performance on the day. While the German DAX Index crept up by 0.1 percent, the U.K.'s FTSE 100 Index and the French CAC 40 Index dropped by 0.8 percent and 0.6 percent, respectively.

In the bond market, treasuries showed a lack of direction throughout much of the session before closing nearly flat. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, edged down by less than a basis point to 2.327 percent.

Looking Ahead

A report on U.S. import and export prices may attract some attention on Friday along with speeches by several Federal Reserve officials.