U.S. Stocks Come Under Pressure After Showing A Lack Of Direction In Early Trading

(RTTNews) - After showing a lack of direction early in the session, stocks moved sharply lower over the course of the trading day on Thursday. The major averages pulled back firmly into negative territory, with the tech-heavy Nasdaq showing a particularly steep drop.

The major averages moved roughly sideways going into the close, stuck in the red. The Dow tumbled 353.51 points or 1.3 percent to 26,652.33, the Nasdaq plunged 244.71 points or 2.3 percent to 10,461.42 and the S&P 500 slumped 40.36 points or 1.2 percent to 3,235.66.

A sharp decline by shares of Microsoft (MSFT) weighed on the markets, with the software giant tumbling by 4.4 percent.

Microsoft reported quarterly results that beat analyst estimates on both the top and bottom lines but said transactional license purchasing continued to slow and its LinkedIn unit was negatively impacted by the weak job market.

The weakness on Wall Street also came following the release of some disappointing U.S. economic data, including a Labor Department report showing first-time claims for U.S. unemployment benefits increased for the first time in sixteen weeks.

The report said initial jobless claims jumped to 1.416 million in the week ended July 18th, an increase of 109,000 from the previous week's revised level of 1.307 million.

Economists had expected jobless claims to come in unchanged compared to the 1.300 million originally reported for the previous month.

Jobless claims increased for the first time since late March but remain well below the record high of 6.867 million set in the week ended March 28th.

"The labor market remains in a precarious place as Covid-19 cases surge in some parts of the country and stricter measures are adopted in response," said Nancy Vanden Houten, Lead U.S. Economist at Oxford Economics.

She added, "Claims data from the last few weeks point to layoffs and less rehiring in possible signs of job losses in July payroll employment.

A separate report from the Conference Board showed its reading on leading U.S. economic indicators increased by less than expected in the month of June.

The Conference Board said its leading economic index jumped by 2.0 percent in June after soaring by an upwardly revised 3.2 percent in May and plunging by 6.3 percent in April.

Economists had expected the index to surge up by 2.5 percent in June compared to the 2.8 percent spike originally reported for the previous month.

Ataman Ozyildirim, Senior Director of Economic Research at The Conference Board, noted labor market conditions and stock prices made particularly strong positive contributions.

"However, broader financial conditions and the consumers' outlook on business conditions still point to a weak economic outlook," Ozyildirim said.

He added, "Together with a resurgence of new COVID-19 cases across much of the nation, the LEI suggests that the U.S. economy will remain in recession territory in the near term."

Earlier in the day, the negative sentiment generated was partly offset by news that Senate Republicans and White House negotiators have reached a "fundamental agreement" on a $1 trillion coronavirus relief bill.

The news added to recent optimism about additional stimulus, although lawmakers still need to hash out the differences between the GOP proposal and the $3.4 trillion bill passed by the Democratic-controlled House.

Sector News

With Microsoft leading the way lower, software stocks showed a substantial move to the downside over the course of the session. Reflecting the weakness in the sector, the Dow Jones U.S. Software Index plummeted by 3.3 percent.

Considerable weakness also emerged among retail stocks, as reflected by the 2.1 percent slump by the Dow Jones U.S. Retail Index.

Gold stocks also came under pressure as the day progressed, dragging the NYSE Arca Gold Bugs Index down by 2.1 percent. The index reached a seven-year intraday high before pulling back sharply.

The downturn by gold stocks came despite a jump by the price of the precious metal, with gold for August delivery soaring $24.90 to $1,890 an ounce.

Semiconductor, biotechnology and pharmaceutical stocks also saw notable weakness, while oil service stocks moved sharply higher even though the price of crude oil showed a notable drop on the day.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region turned in a mixed performance on Thursday, with the Japanese markets closed for a holiday. China's Shanghai Composite Index dipped by 0.2 percent, while Hong Kong's Hang Seng Index advanced by 0.8 percent.

The major European markets also ended the day mixed. While the U.K.'s FTSE 100 Index inched up by 0.1 percent, the German DAX Index closed just below the unchanged line and the French CAC 40 Index edged down by 0.1 percent.

In the bond market, treasuries moved modestly higher, extending the upward trend seen in recent sessions. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, edged down by 1.3 basis points to a three-month closing low of 0.582 percent.

Looking Ahead

A report on new home sales may attract some attention on Friday, although traders are also likely to keep an eye on rising tensions between the U.S. and China and the latest coronavirus news.

On the earnings front, Intel (INTC), E*Trade (ETFC), Mattel (MAT) and Skyworks (SWKS) are among the companies releasing their quarterly results after the close of today's trading.

American Express (AXP), Honeywell (HON) and Verizon (VZ) are also among the companies due to report their results before the start of trading on Friday.