Stocks Close Moderately Lower But Well Off Worst Levels - U.S. Commentary

(RTTNews) - After falling sharply early in the trading session on Thursday, stocks regained some ground as the day progressed but still closed mostly lower. With the losses on the day, the Nasdaq and the S&P 500 set one-month closing lows.

The major averages finished the day moderately lower. The Dow dipped 45.26 points or 0.3 percent to 18,098.94, the Nasdaq slid 25.69 points or 0.5 percent to 5,213.33 and the S&P 500 fell 6.63 points or 0.3 percent to 2,132.55.

Concerns about the global economy contributed to the early weakness on Wall Street following the release of disappointing Chinese trade data.

However, traders looked to pick up stocks at reduced levels after the drop pulled the Dow and the S&P 500 to their lowest intraday levels in three months.

The early weakness came as a report out of China showed that exports fell 10 percent year-over-year in September compared to expectations for a decrease of about 3 percent. Imports also fell by 1.9 percent, belying expectations for a 0.9 percent increase.

The Chinese trade surplus subsequently narrowed to $42 billion, smaller than the $53 billion surplus forecast by economists.

Julian Evans-Pritchard, China Economist at Capital Economics, said, "Overall, today's data are a reminder that China faces a challenging external environment which is likely to keep export growth subdued in coming quarters."

"Separately, the drop in imports could be an early sign that the recent recovery in economic activity is losing momentum," he added. "Nonetheless, we would caution against reading too much into a single data point given the volatility of the trade figures."

Concerns about a near-term interest rate hike by the Federal Reserve also weighed on the markets after a report from the Labor Department showed initial jobless claims at their lowest level in over forty years.

The Labor Department said initial jobless claims came in at 246,000 in the week ended October 8th, unchanged from the previous week's revised level. Economists had expected jobless claims to climb to 254,000.

With the downward revision to the figure for the previous week, jobless claims held at their lowest levels since November of 1973.

Sector News

Steel stocks saw substantial weakness on the day amid concerns about the outlook for global demand. Reflecting the weakness in the steel sector, the NYSE Arca Steel Index plunged by 2.9 percent.

U.S. Steel (X), Cliffs Natural Resources (CLF), and Olympic Steel (ZEUS) turned in some of the steel sector's worst performances.

Significant weakness was also visible among networking stocks, which extended a recent move to the downside. The NYSE Arca Networking Index slid by 1.5 percent to its lowest closing level in a month.

Financial, semiconductor, and computer hardware stocks also saw notable weakness but ended the session well off their worst levels of the day.

On the other hand, gold stocks moved sharply higher as the day progressed, driving the NYSE Arca Gold Bugs Index up by 1.8 percent. The strength in the sector came as gold for December delivery climbed $3.80 to $1,257.60 an ounce.

Airline, railroad, and utilities stocks also moved to the upside on the day, helping the broader markets to recover from the early weakness.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved mostly lower during trading on Thursday. Japan's Nikkei 225 Index fell by 0.4 percent, while Hong Kong's Hang Seng Index tumbled by 1.6 percent.

The major European markets also came under pressure on the day. While the U.K.'s FTSE 100 Index slid by 0.7 percent, the German DAX Index and the French CAC 40 Index slumped by 1 percent and 1.1 percent, respectively.

In the bond market, treasuries regained some ground after trending lower over the past several sessions. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, dropped 4 basis points to 1.738 percent.

Looking Ahead

Reports on retail sales and producer prices are likely to attract attention on Friday, as the data may impact the outlook for monetary policy.

Additionally, financial giants Citigroup (C), JPMorgan Chase (JPM), and Wells Fargo (WFC) are among the companies due to report their quarterly results before the start of trading on Friday.