Stocks Fall Sharply To Lowest Levels In Over A Month - U.S. Commentary

(RTTNews) - Stocks moved sharply lower over the course of the trading day on Wednesday, adding to the modest weakness seen in the two previous sessions. With the losses on the day, the major averages fell to their lowest closing levels in over a month.

The major averages ended the day firmly in negative territory but off their lows for the session. The Dow tumbled 238.19 points or 1.4 percent to 16,804.71, the Nasdaq plunged 71.30 points or 1.6 percent to 4,422.09 and the S&P 500 plummeted 26.13 point or 1.3 percent to 1,946.16.

The sell-off on Wall Street partly reflected a negative reaction to the latest batch of U.S. economic data, including a report from the Institute for Supply Management showing a notable slowdown in the pace of growth in manufacturing activity in the month of September.

The ISM said its purchasing managers index fell to 56.6 in September from 59.0 in August, although a reading above 50 indicates continued growth in the manufacturing sector. Economists had expected the index to edge down to 58.5.

Bradley Holcomb, chair of the ISM Manufacturing Business Survey Committee, said, "Comments from the panel reflect a generally positive business outlook, while noting some labor shortages and continuing concern over geopolitical unrest."

A separate report from the Commerce Department showed an unexpected drop in construction spending in the month of August.

The report said construction spending fell 0.8 percent to a seasonally adjusted annual rate of $961.0 billion in August, while economists had expected spending to climb by 0.5 percent.

Meanwhile, payroll processor ADP released a report before the start of trading showing stronger than expected private sector job growth in September.

ADP said private sector employment jumped by 213,000 jobs in September following an increase of 202,000 jobs in August. Economists had been expecting an increase of about 205,000 jobs.

The report generated some optimism about Friday's monthly jobs report from the Labor Department but also added to recent concerns about the outlook for interest rates.

Geopolitical concerns also weighed on the markets along with worries about news of the first case of Ebola diagnosed in the U.S.

Sector News

Amid concerns about the impact the Ebola news could have on air travel, airline stocks turned in some of the market's worst performance on the day. Reflecting the weakness in the airline sector, the NYSE Arca Airline Index tumbled by 3.1 percent.

The steep drop extended a recent downward trend by the airline index, which ended the session at its lowest closing level in five months.

Railroad stocks also saw considerable weakness on the day, dragging the Dow Jones Railroads Index down by 2.7 percent to a one-month closing low. Greenbrier (GBX) and Trinity Industries (TRN) posted standout losses.

Significant weakness was also visible among oil service stocks, as reflected by the 2.5 percent loss posted by the Philadelphia Oil Service Index. The weakness in the sector came as crude for November delivery fell $0.43 to $90.73 a barrel.

Steel, chemical, computer hardware and semiconductor stocks also came under pressure amid the broad based weakness in the markets.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region turned in a mixed performance on Wednesday. Japan's Nikkei 225 Index fell by 0.6 percent, while Australia's All Ordinaries Index advanced by 0.7 percent. The markets in Hong Kong and China were closed for a holiday.

Meanwhile, the major European markets showed notable moves to the downside on the day. While the French CAC 40 Index tumbled by 1.2 percent, the U.K.'s FTSE 100 Index and the German DAX Index both slumped by 1 percent.

In the bond market, treasuries moved sharply higher on the heels of the economic data. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, plummeted by 10.5 basis points to 2.403 percent.

Looking Ahead

Trading on Thursday could be impacted by reaction to reports on jobless claims and factory orders, although activity may be somewhat subdued ahead of the release of the more closely watched monthly jobs report on Friday.