Stocks Climb Off Worst Levels But Remain Firmly Negative - U.S. Commentary

(RTTNews) - After falling sharply at the start of trading on Wednesday, stocks have regained some ground over the course of the session but remain firmly negative. Earlier in the day, the major averages hit their lowest intraday levels in about three months.

The major averages have moved roughly sideways in recent trading, stuck in the red. The Dow is down 199.49 points or 1.2 percent at 16,959.17, the Nasdaq is down 37.18 points or 0.8 percent at 4,854.25 and the S&P 500 is down 20.46 points or 1 percent at 1,996.25.

The initial weakness on Wall Street largely reflected a negative reaction to North Korea's claim that it has successfully performed the republic's first hydrogen bomb test.

North Korean state television said the test of the miniaturized device shows the communist nation has joined the ranks of advanced nuclear states.

The news has added to recent geopolitical concerns amid rising tensions between Saudi Arabia and Iran and the ongoing fight against the terrorist group known as ISIS.

Subsequently, traders have largely shrugged off a slew of U.S. economic data, including a report from payroll processor ADP showing stronger than expected private sector job growth in December.

ADP said private sector employment jumped by 257,000 jobs in December after climbing by a revised 211,000 jobs in November. Economists had expected employment to increase by about 190,000 jobs.

The bigger than expected increase in private sector employment reflected the strongest job growth since employment surged up by 275,000 jobs in December of 2014.

Meanwhile, the Institute for Supply Management released a separate report showing an unexpected drop by its index of service sector activity, with the decrease reflecting faster deliveries.

The ISM said its non-manufacturing index edged down to 55.3 in December from 55.9 in November, although a reading above 50 continues to point to growth in the service sector.

The modest decrease came as a surprise to economists, who had expected the non-manufacturing index to inch up to 56.2.

Separate reports released by the Commerce Department showed a modest pullback in factory orders and a narrower trade deficit in the month of November.

Sector News

Energy stocks continue to see substantial weakness in mid-day trading, moving lower along with the price of crude oil. Crude for February delivery is tumbling $1.61 to $34.36 a barrel after a report showed a sharp jump in U.S. gasoline inventories.

Reflecting the weakness in the energy sector, the NYSE Arca Natural Gas Index has plunged by 5.1 percent, while the Philadelphia Oil Service Index is down by 4 percent and the NYSE Arca Oil & Gas Index is down by 3.6 percent.

Considerable weakness also remains visible among steel stocks, which have come under pressure amid concerns about the outlook for global demand. The NYSE Arca Steel Index is down by 3.3 percent after hitting a record intraday low.

Most of the other major sectors have also moved to the downside, with railroad, chemical, and semiconductor stocks seeing notable weakness.

On the other hand, gold stocks are among the few groups bucking the downtrend, resulting in a 2.6 percent jump by the NYSE Arca Gold Bugs Index. The strength in the sector comes as gold for February delivery is climbing $11.30 to $1,089.70 an ounce.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved mostly lower on Wednesday. Japan's Nikkei 225 Index and Hong Kong's Hang Seng Index both slumped by 1 percent, while China's Shanghai Composite Index bucked the downtrend with a 2.3 percent jump.

The major European markets showed significant moves to the downside on the day. While the French CAC 40 Index tumbled by 1.3 percent, the U.K.'s FTSE 100 Index and the German DAX Index dropped by 1 percent and 0.9 percent, respectively.

In the bond market, treasuries have moved notably higher amid the worries about global security. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, is down by 5.8 basis points at 2.19 percent.