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Stocks Fall As Cyprus Worries Overshadow Upbeat Data - U.S. Commentary


Stocks moved mostly lower during trading on Thursday, offsetting the gains posted in the previous session. The pullback by the markets came as worries about the situation in Cyprus overshadowed a batch of largely upbeat U.S. economic data.

The major averages ended the day in negative territory but off their worst levels of the session. The Dow fell 90.24 points or 0.6 percent to 14,421.49, the Nasdaq slid 31.59 points or 1 percent to 3,222.60 and the S&P 500 dropped 12.91 points or 0.8 percent to 1,545.80.

Worries about the situation in Cyprus contributed to the weakness on Wall Street, with the Mediterranean island nation seen as potentially headed toward default.

Cypriot politicians are attempting to come up with a "Plan B" after rejecting a European Union bailout plan that would tax bank deposits, but the European Central Bank indicated that it would only provide emergency funding for the nation's banks until Monday.

The ECB said that it would only provide emergency funding thereafter if an EU/IMF program is in place that would ensure the solvency of the concerned banks.

Additionally, a notable drop by shares of Oracle (ORCL) weighed on the tech-heavy Nasdaq, with the software giant plummeting by 9.7 percent after reporting weaker than expected third quarter results.

Traders largely shrugged off a batch of upbeat U.S. economic data, including a Labor Department report showing that jobless claims came in below economist estimates in the week ended March 16th.

While jobless claims edged up to 336,000 from the previous week's revised figure of 334,000, economists had expected claims to climb to 340,000.

Jennifer Lee, senior economist at BMO Capital, noted that the week ended March 16th is the key survey week and said the data suggests that March payrolls could increase by more than 200,000.

A separate report from the National Association of Realtors showed existing home sales at a three-year high in February, while the Philadelphia Federal Reserve unexpectedly reported an expansion in regional manufacturing activity in March.

Sector News

Networking stocks showed a significant move to the downside on the day, dragging the NYSE Arca Networking Index down by 1.9 percent. The loss pulled the index down toward the low end of a recent trading range.

Cisco Systems (CSCO) helped to lead the networking sector lower, with the industry giant falling by 3.8 percent after FBR Capital downgraded its rating on the stock to Underperform.

Significant weakness was also visible among chemical stocks, as reflected by the 2 percent loss posted by the Dow Jones Chemicals Index. Eastman Chemical (EMN) and FMC Corp. (FMC) turned in two of the sector's worst performances.

Housing stocks also came under pressure on the day, dragging the Philadelphia Housing Sector Index down by 1.8 percent. The loss by the index came after it ended the previous session at its best closing level in well over five years.

Trucking, brokerage, and semiconductor stocks also posted steep losses on the day, while gold stocks bucked the downtrend amid an increase by the price of the precious metal.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region turned in yet another mixed performance on Thursday. While Japan's Nikkei 225 Index surged up by 1.3 percent following yesterday's holiday, Hong Kong's Hang Seng Index and Australia's All Ordinaries Index both edged down by 0.1 percent.

Meanwhile, the major European markets all moved to the downside on the day. The French CAC 40 Index tumbled by 1.4 percent, while the German DAX Index and the French CAC 40 Index fell by 0.9 percent and 0.8 percent, respectively.

In the bond market, treasuries showed a lack of direction through the session before closing roughly flat. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, edged down by less than a basis point to 1.932 percent.

Looking Ahead

Following the slew of U.S. economic data released today, the economic calendar for Friday is relatively quiet. Subsequently, traders are likely to keep a close eye on developments overseas.

Trading could also be impacted by reaction to earnings news from Nike (NKE) and Micron Technology (MU), which are releasing their quarterly results after the close of today's trading.

by RTTNews Staff Writer

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