Stocks Regain Ground But Remain Mostly Negative - U.S. Commentary

(RTTNews) - Selling pressure has waned from earlier in the session, but stocks remain mostly negative in mid-day trading on Thursday. A weaker than expected reading on U.S. consumer spending continues to weigh on the markets.

The major averages have climbed well off their worst levels of the day but currently remain firmly in the red. The Dow is down 66.27 points or 0.4 percent at 16,801.24, the Nasdaq is down 14.45 points or 0.3 percent at 4,365.31 and the S&P 500 is down 7.35 points or 0.4 percent at 1,952.18.

The weakness on Wall Street is partly due to renewed concerns about the economic outlook following the release of a Commerce Department report showing weaker than expected personal spending growth in the month of May.

The Commerce Department said spending edged up by 0.2 percent in May after coming in unchanged in April, while economists had expected spending to increase by 0.4 percent.

The report also showed that real spending, which is adjusted to remove price changes, dipped by 0.1 percent in May following a 0.2 percent drop in April.

Following yesterday's report showing a sharp downward revision to the pace of consumer spending growth in the first quarter, the data has raised some questions about the second quarter recovery.

Chris Low, chief economist at FTN Financial, said, "Unless June data are strong, we'll be lucky to hit 2% GDP in the second quarter."

"As a result, first half growth could be down and the year as a whole could be as weak as 1%," he added. "Growth that weak demands a rethink by the Fed and should have investors questioning the 6% year-to-date rise in stocks."

The report also showed a notable acceleration in the pace of consumer price growth, adding to recent worries about inflation.

A separate report from the Labor Department showed that initial jobless claims edged down to 312,000 in the week ended June 21st, a decrease of 2,000 from the previous week's revised level of 314,000.

Economists had been expecting jobless claims to dip to 310,000 from the 312,000 originally reported for the previous week.

Peter Boockvar, managing director at the Lindsey Group, said the current level of claims is consistent with another increase of 200,000 jobs in June.

Sector News

While a majority of the major sectors have moved to the downside on the day, most are showing only modest moves.

Electronic storage stocks are seeing notable weakness, however, with the NYSE Arca Disk Drive Index down by 1.1 percent. Hutchinson Technology (HTCH) has helped to lead the sector lower, falling by 2.9 percent.

Semiconductor, trucking, software, and banking stocks are also seeing some weakness in mid-day trading, but selling pressure has waned from earlier in the session.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved mostly higher on Thursday following the positive lead from Wall Street overnight. Japan's Nikkei 225 Index rose by 0.3 percent, while Hong Kong's Hang Seng Index jumped by 1.5 percent.

Meanwhile, the major European markets ended the day mixed. While the U.K.'s FTSE 100 Index closed just above the unchanged line, the French CAC 40 Index and the German DAX Index fell by 0.5 percent and 0.6 percent, respectively.

In the bond market, treasuries are moving notably higher, extending a recent uptrend. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, is down by 4.1 basis points at 2.518 percent.