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Stocks Falling Sharply Amid Rising Treasury Yields - U.S. Commentary

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After coming under pressure early in the session, stocks continue to see significant weakness in mid-day trading on Thursday. With the steep drop on the day, the Dow is pulling back well off the record closing high set in the previous session.

In recent trading, the Nasdaq and the S&P 500 have fallen to new lows for the session. The Dow is down 231.38 points or 0.9 percent at 26,597.01, the Nasdaq is down 128.71 points or 1.6 percent at 7,896.38 and the S&P 500 is down 25.03 points or 0.9 percent at 2,900.48.

Stocks are extending the pullback seen in afternoon trading on Wednesday as a recent jump by U.S. treasury yields has raised concerns about the outlook for interest rates.

With the ten-year yield reaching its highest levels in over seven years, traders seem worried the Federal Reserve may raise rates more aggressively than currently anticipated.

Adding to the concerns Fed Chairman Jerome Powell said in remarks at the Atlantic Festival in Washington, D.C. after the close of trading on Wednesday that interest rates are "a long way from neutral" even after recent increases.

"The really extremely accommodative low interest rates that we needed when the economy was quite weak, we don't need those anymore. They're not appropriate anymore," Powell told Judy Woodruff of PBS.

"Interest rates are still accommodative, but we're gradually moving to a place where they will be neutral," he added. "We may go past neutral, but we're a long way from neutral at this point."

On the U.S. economic front, the Labor Department released a report showing a bigger than expected drop in initial jobless claims in the week ended September 29th.

The Labor Department said initial jobless claims fell to 207,000, a decrease of 8,000 from the previous week's revised level of 215,000.

Economists had expected jobless claims to edge down to 213,000 from the 214,000 originally reported for the previous week.

A separate report from the Commerce Department showed a bigger than expected rebound in factory orders in the month of August.

The Commerce Department said factory orders surged up by 2.3 percent in August after falling by a revised 0.5 percent in July, while economists had expected factory orders to jump by 2.1 percent

Sector News

Tobacco stocks have moved sharply lower over the course of the session, extending the pullback seen in the previous session. The NYSE Arca Tobacco Index is plunging by 2/2 percent, offsetting the spike seen on Tuesday.

Substantial weakness has also emerged among semiconductor and biotechnology stocks, contributing to the particularly steep drop by the tech-heavy Nasdaq.

Reflecting the weakness in the sectors, the Philadelphia Semiconductor Index and the NYSE Arca Biotechnology Index are both down by 1.9 percent.

Retail, computer hardware, and housing stocks are also seeing considerable weakness in mid-day trading, while brokerage stocks are bucking the downtrend.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved mostly lower during trading on Thursday. Japan's Nikkei 225 Index fell by 0.6 percent, while Hong Kong's Hang Seng Index plunged by 1.7 percent.

The major European markets also moved to the downside on the day. While the German DAX Index fell by 0.4 percent, the U.K.'s FTSE 100 Index and the French CAC 40 Index slumped by 1.2 percent and 1.5 percent, respectively.

In the bond market, treasuries are extending the sharp drop seen in the previous session. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, is up by 3.7 basis points at 3.198 percent.

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