Worries About The Fed Continue To Weigh On Wall Street - U.S. Commentary

(RTTNews) - Despite a lack of major catalysts, stocks moved notably lower over the course of the trading day on Wednesday. The pullback following yesterday's modestly higher close reflected the recent downward momentum for the markets.

The major averages ended the day firmly in negative territory, near their worst levels of the day. The Dow fell 113.35 points or 0.7 percent to 15,337.27, the Nasdaq dipped 15.17 points or 0.4 percent to 3,669.27 and the S&P 500 slid 8.77 points or 0.5 percent to 1,685.39.

The weakness that emerged on Wall Street reflected ongoing concerns about the outlook for the Federal Reserve's stimulus program.

Many economists expect the Fed to begin scaling back its asset purchase program at its September meeting, which is now just over a month away.

Traders may also have been looking to move out of riskier assets ahead of the release of a slew of economic data over next two days.

Traders will be flooded with data on Thursday, including reports on weekly jobless claims, industrial production, and regional manufacturing activity in the New York and Philadelphia areas.

Reports on consumer price inflation and homebuilder confidence may also attract some attention, although the volume of data may lead to a confused reaction.

Ahead of tomorrow's stampede of data, traders largely shrugged off a report from the Labor Department showing that producer prices unexpectedly came in unchanged in the month of July.

The Labor Department said its producer price index was unchanged in July following a 0.8 percent increase in June. Economists had been expecting the index to increase by about 0.3 percent.

The core producer price index, which excludes food and energy prices, edged up by 0.1 percent in July after rising by 0.2 percent in the previous month. Core prices had been expected to show another 0.2 percent increase.

Paul Dales, Senior U.S. Economist at Capital Economics, said, "We doubt that July's soft producer prices figures will force the Fed to conclude that the recent downward trend in core price pressures is more than temporary."

Meanwhile, a report out of Europe showed that the Eurozone economy shrugged off its longest recession on record in the second quarter of 2013, helped by strong recoveries in Germany and France.

The Eurostat report showed that GDP expanded 0.3 percent in the second quarter, reversing a 0.3 percent contraction in the first quarter. Economists had forecast 0.2 percent GDP growth.

Sector News

Electronic storage stocks saw considerable weakness on the day, dragging the NYSE Arca Disk Drive Index down by 2.5 percent. With the drop, the index fell to its lowest closing level in over a month.

Imation (IMN) and Hutchinson Technology (HTCH) turned in two of the storage sector's worst performances, falling by 4.2 percent and 3.1 percent, respectively.

Significant weakness was also visible among semiconductor stocks, as reflected by the 1.6 percent loss posted by the Philadelphia Semiconductor Index. Cree (CREE) led the sector lower, tumbling by 22.4 percent after providing disappointing first quarter guidance.

Trucking, health insurance, and retail stocks also saw notable weakness, while most of the other major sectors showed more modest moves to the downside.

On the other hand, gold stocks bucked the downtrend on the day, driving the NYSE Arca Gold Bugs Index up by 5.6 percent. The strength among gold stocks came as gold for December delivery climbed $12.90 to $1,333.40 an ounce.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region turned in a mixed performance during trading on Wednesday. Japan's Nikkei 225 Index jumped by 1.3 percent, while China's Shanghai Composite Index fell by 0.3 percent.

The major European markets also turned in a mixed performance on the day. While the U.K.'s FTSE 100 Index fell by 0.4 percent, the French CAC 40 Index advanced by 0.5 percent and the German DAX Index rose by 0.3 percent.

In the bond market, treasuries showed a lack of direction after ending the previous session sharply lower. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, edged down by less than a basis point to 2.712 percent.

Looking Ahead

Trading on Thursday is likely to be impacted by the slew of economic data and the interpretation of how it will impact the outlook for the Fed's asset purchase program.

Earnings news may also attract some attention, as networking giant Cisco (CSCO) is releasing its fourth quarter results after the close of today's trading and retail giant Wal-Mart (WMT) is due to release its second quarter results before the start of trading on Thursday.