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Interest Rate Worries Weighing On Wall Street - U.S. Commentary

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Stocks have moved mostly lower in morning trading on Thursday following the lackluster performance seen in the previous session. The major averages have moved to the downside but remain well off their recent lows.

In recent trading, the major averages have climbed off their worst levels of the but remain in the red. The Dow is down 72.75 points or 0.3 percent at 25,633.93, the Nasdaq is down 46.73 points or 0.6 percent at 7,595.97 and the S&P 500 is down 8.26 points or 0.3 percent at 2,800.95.

Lingering concerns about the outlook for interest rates are weighing on the markets as traders continue to digest the minutes of the Federal Reserve's latest monetary policy meeting.

The minutes released Wednesday afternoon showed the Fed continues to favor a "gradual approach" to raising interest rates, with the meeting participants generally judging that the economy was evolving about as anticipated.

The Fed's forecasts point to one more rate hike before the end of this year, with CME Group's FedWatch indicating a nearly 80 percent chance of a quarter-point rate increase in December.

The central bank argued the "gradual approach" would balance the risk of raising rates too quickly, causing a slowdown in the economy, and raising rates too slowly, leading to inflation above the central bank's 2 percent objective.

The Fed's assessment that the "gradual approach" to raising rates remains appropriate comes even as President Donald Trump has repeatedly attacked the central bank for hiking rates too quickly.

On the U.S. economic front, the Labor Department released a report showing a modest decrease in first-time claims for U.S. unemployment benefits in the week ended October 13th.

The report said initial jobless claims slipped to 210,000, a decrease of 5,000 from the previous week's revised level of 215,000. Economists had expected jobless claims to edge down to 212,000.

A separate report released by the Federal Reserve Bank of Philadelphia showed manufacturing activity in the Philadelphia area grew at a slightly slower rate in the month of October.

The Philly Fed said its diffusion index for current general activity edged down to 22.2 in October from 22.9 in September, although a positive reading still indicates growth in regional manufacturing activity. The index had been expected to drop to 20.0.

Meanwhile, the Conference Board released a report showing its index of leading U.S. economic indicators increased in line with economist estimates in September.

The Conference Board said its leading economic index climbed by 0.5 percent in September after rising by 0.4 percent in August.

"The U.S. LEI improved further in September, suggesting the U.S. business cycle remains on a strong growth trajectory heading into 2019," said Ataman Ozyildirim, Director and Global Research Chair at the Conference Board.

He added, "However, the LEI's growth has slowed somewhat in recent months, suggesting the economy may be facing capacity constraints and increasingly tight labor markets."

Oil service stocks have climbed off their worst levels of the day but continue to see considerable weakness in morning trading. The Philadelphia Oil Service Index is down by 1.4 percent after hitting its lowest intraday level in a month.

The weakness among oil service stocks comes amid a decrease by the price of the crude oil, with crude for November delivery falling $0.63 to $69.12 a barrel.

Steel, semiconductor, and transportation stocks are also seeing significant weakness, while tobacco stocks are adding to the strong gains posted in the previous session.

In overseas trading, stock markets across the Asia-Pacific region moved mostly lower during trading on Thursday. Japan's Nikkei 225 Index slid by 0.8 percent, while China's Shanghai Composite Index plunged by 2.9 percent.

The major European markets have also moved to the downside on the day. While the German DAX Index has fallen by 0.6 percent, the U.K.'s FTSE 100 Index and the French CAC 40 Index are down by 0.3 percent and 0.2 percent, respectively.

In the bond market, treasuries are extending the downward move seen over the course of the previous session. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, is up by 2.6 basis points at 3.205 percent.

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