After initially showing a lack of direction, stocks have moved sharply lower over the course of the trading day on Thursday. A disappointing batch of U.S. economic data is weighing on stocks, which are partly offsetting their recent gains.
The major averages have edged up off their worst levels of the day in recent trading but remain firmly negative. The Dow is down 85.75 points or 0.7 percent at 12,738.64, the Nasdaq is down 32.05 points or 1.1 percent at 2,898.40 and the S&P 500 is down 11.67 points or 0.9 percent at 1,344.02.
While some recent disappointing economic data generated optimism about further stimulus, today's weaker than expected reports were greeted negatively by traders now that the Federal Reserve meeting is in the rear-view mirror.
The weakness that has emerged on Wall Street is partly due to a report from the National Association of Realtors showing a bigger than expected drop in existing home sales in May.
NAR said existing home sales fell by 1.5 percent to a seasonally adjusted annual rate of 4.55 million in May from 4.62 million in April. Economists had expected a slightly more modest decrease to an annual rate of 4.57 million.
However, NAR chief economist Lawrence Yun said, "The slight pullback in monthly home sales is more likely due to supply constraints rather than softening demand."
A separate report from the Philadelphia Federal Reserve showed that Philadelphia-area manufacturing firms indicated weaker business conditions in June, with the index of regional manufacturing activity falling to a ten-month low.
The Philly Fed said its diffusion index of current activity fell to a negative 16.6 in June from a negative 5.8 in May, with a negative reading indicating a contraction in regional manufacturing activity. Economists had expected the index to rebound to a positive 0.5.
Before the start of trading, the Labor Department's report on initial jobless claims in the week ended June 16th showed that claims fell modestly for the week but still came in above analyst estimates.
The release of the disappointing data comes on the heels of the Federal Reserve's announcement Wednesday of the extension of its "Operation Twist" program until the end of the year.
"Operation Twist" involves replacing short-term securities in the Fed's bond portfolio with longer-term securities in an effort to push already low long-term interest rates even lower.
Fed Chairman Ben Bernanke also noted that the central bank is prepared to take additional steps to prop up the sluggish economy.
Sector News
While most of the major sectors have moved to the downside over the course of the trading day, resource stocks are seeing substantial weakness amid a decrease in commodities prices.
Gold prices are posting particularly steep losses in mid-day trading amid a sharp drop by the price of the precious metal. With gold for August delivery tumbling $42.20 to $1,573.60 an ounce, the NYSE Arca Gold Bugs Index is down by 3.1 percent.
Significant weakness is also visible among oil service stocks, which are moving lower along with the price of crude oil. The Philadelphia Oil Service Index is down by 3.3 percent, as crude for August delivery is sliding $1.66 to $79.79 a barrel.
Technology stocks have also come under considerable selling pressure, contributing to the steep drop by the tech-heavy Nasdaq. Electronic storage, networking, and semiconductor stocks are turning in some of the worst performances.
Brokerage, chemical, and healthcare provider stocks are also posting notable losses, while modest strength is visible among utilities stocks.
Other Markets
In overseas trading, stock markets across the Asia-Pacific region moved mostly lower on Thursday, although Japan's Nikkei 225 Index bucked the downtrend and rose by 0.8 percent. Hong Kong's Hang Seng Index and China's Shanghai Composite Index fell by 1.3 percent and 1.4 percent, respectively.
The major European markets also moved to the downside over the course of the trading day. The U.K.'s FTSE 100 Index tumbled 1 percent, the German DAX Index slid 0.8 percent, and the French CAC 40 Index dropped 0.4 percent.
In the bond market, treasuries have moved moderately higher on the heels of the disappointing U.S. economic data. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, is down 3.6 basis points at 1.606 percent.
by RTT Staff Writer
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