Stocks Extend Downtrend With Sharply Lower Close - U.S. Commentary

(RTTNews) - Stocks moved sharply lower over the course of the trading day on Thursday, extending the downward trend seen over the past several sessions. With the steep losses on the day, the major averages pulled back further off the three-month highs set earlier this month.

The major averages saw further downside going into the close, ending the session near their worst levels of the day. The Dow plunged 254.15 points or 1.4 percent to 17,448.07, the Nasdaq tumbled 61.94 points or 1.2 percent to 5,005.08 and the S&P 500 plummeted 29.03 points or 1.4 percent to 2,045.97.

The continued weakness on Wall Street partly reflected the recent downward momentum, with the S&P 500 closing lower for the sixth time in the past seven sessions.

Renewed concerns about the outlook for monetary policy have recently weighed on the markets after last Friday's better than expected October jobs report.

The upbeat jobs data has led to a considerable increase in expectations that the Federal Reserve will raise interest rates at its meeting next month.

Traders subsequently kept a close eye on today's remarks by a number of Fed officials, including Fed Chair Janet Yellen.

Yellen delivered welcoming remarks at a Fed conference on post-crisis monetary policy but did not specifically discuss the outlook for rates.

Separately, St. Louis Fed President James Bullard said it would be prudent to move monetary policy closer to normal levels now that the goals have been attained.

New York Fed President William Dudley also said the risks of moving too quickly or too slowly are nearly balanced but emphasized that a December rate hike will depend on incoming data

Meanwhile, Chicago Fed President Charles Evans had a more cautious tone and said it could be "well into" next year before the inflation goal to support a rate hike is reached.

On the U.S. economic front, the Labor Department released a report before the start of trading showing that initial jobless claims came in flat in the week ended November 7th.

The report said initial jobless claims came in at 276,000, unchanged from the previous week's unrevised level. Economists had expected jobless claims to dip to 270,000.

Sector News

Steel stocks saw substantial weakness on the day, resulting in a 3.1 percent drop by the NYSE Arca Steel Index. With the loss, the index fell to its lowest closing level in well over a month.

ArcelorMittal (MT), Schnitzer Steel (SCHN), and Cliffs Natural Resources (CLF) turned in some of the steel sector's worst performances.

Considerable weakness was also visible among energy stocks, which moved along with the price of crude oil. Crude for December delivery tumbled $1.18 to a more than two-month closing low of $41.75 a barrel

Reflecting the weakness in the energy sector, the NYSE Arca Oil & Gas Index plunged by 2.2 percent, while the NYSE Arca Natural Gas Index and the Philadelphia Oil Service Index slumped by 2.1 percent and 1.9 percent, respectively.

Housing stocks also showed a significant move to the downside on the day, dragging the Philadelphia Housing Sector Index down by 2.2 percent. Hovnanian Enterprises (HOV) posted a steep loss.

Biotechnology, financial, trucking, and computer hardware stocks also came under pressure amid broad based weakness on Wall Street.

Other Markets

In overseas trading, most stock markets across the Asia-Pacific region saw lackluster trading on Thursday, with Japan's Nikkei 225 Index closing nearly flat. However, Hong Kong's Hang Seng Index showed a strong move to the upside, jumping by 2.4 percent.

Meanwhile, the major European markets showed significant moves to the downside on the day. While the German DAX Index tumbled by 1.2 percent, the U.K.'s FTSE 100 Index and the French CAC 40 Index both plunged by 1.9 percent.

In the bond market, treasuries showed a lack of direction for 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 2.319 percent.

Looking Ahead

Following some quiet days in terms of U.S. economic news, trading on Friday is likely to be driven by reaction to reports on retail sales, producer prices, and consumer sentiment.

Trading may also be impacted by earnings news from networking giant Cisco (CSCO), which is releasing its fiscal first quarter results after the close of today's trading.