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Stocks End Lackluster Trading Day Modestly Lower - U.S. Commentary


Stocks turned in a relatively lackluster performance over the course of the trading day on Thursday, as traders seemed somewhat reluctant to make any significant moves. The markets experienced some consolidation following two straight days of strong gains.

The major averages bounced back and forth across the unchanged line before closing modestly lower. The Dow dipped 20.88 points or 0.2 percent to 14,054.49, the Nasdaq edged down 2.07 points or 0.1 percent to 3,160.19 and the S&P 500 slipped 1.31 points or 0.1 percent to 1,514.68.

The choppy trading on Wall Street came on the heels of the release of a mixed batch of U.S. economic data, with traders weighing weaker than expected GDP data against upbeat reports on jobless claims and Chicago-area business activity.

While the Commerce Department released a report showing that fourth quarter GDP was revised to show economic growth compared to the previously reported contraction, the pace of growth fell well short of economist estimates.

The report said fourth quarter GDP was upwardly revised to show a 0.1 percent increase compared to the previously reported 0.1 percent drop. However, economists had been expecting the revised report to show 0.5 percent growth.

Meanwhile, the Labor Department released a separate report showing that initial jobless claims dropped to 344,000 in the week ended February 23rd, a decrease of 22,000 from the previous week's revised figure of 366,000.

Economists had expected jobless claims to edge down to 360,000 from the 362,000 originally reported for the previous week.

A separate report from the Institute for Supply Management - Chicago showed that Chicago-area business activity unexpectedly increased at a faster rate in the month of February.

The report said the Chicago business barometer rose to 56.8 in February from 55.6 in January, with a reading above 50 indicating an increase in business activity. The increase came as a surprise to economists, who had expected the barometer to edge down to 55.0.

Uncertainty about the impact of the automatic government spending cuts due to take effect on Friday also contributed to the lackluster performance.

Unless Congress acts, approximately $85 billion in automatic cuts to both defense and domestic spending are due to go into effect

While President Barack Obama is scheduled to meet with Congressional leaders from both parties on Friday, the so-called sequester is not expected to be averted.

Sector News

Most of the major sectors ended the day showing only modest moves, contributing to the relatively lackluster close by the broader markets.

Gold stocks saw substantial weakness, however, as another sharp drop by the price of the precious metal weighed on the sector. With gold for April delivery falling $17.60 to $1,578.10 an ounce, the NYSE Arca Gold Bugs Index tumbled by 2.3 percent to a new three-year closing low.

Health insurance and housing stocks also saw some weakness on the day, while strength was visible among biotechnology stocks.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region saw considerable strength during trading on Thursday. Japan's Nikkei 225 Index surged up by 2.7 percent, while Hong Kong's Hang Seng Index jumped by 2 percent.

The major European markets also showed notable moves to the upside on the day. While the U.K.'s FTSE 100 Index advanced by 0.6 percent, the German DAX Index and the French CAC 40 Index both closed up by 0.9 percent.

In the bond market, treasuries closed modestly higher after turning lower over the course of the previous session. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, edged down by 1.5 basis points to 1.888 percent.

Looking Ahead

While traders are likely to keep a close eye on any last minute developments in Washington on Friday, trading could also be impacted by the release of reports on manufacturing activity, personal income and spending, and construction spending.

On the earnings front, consumer electronics retailer Best Buy (BBY) is among the companies due to release their quarterly results before the start of trading on Friday.

by RTTNews Staff Writer

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