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Stocks Extending Sell-Off Amid Skepticism About Trade Deal - U.S. Commentary

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Stocks have shown a substantial move to the downside in morning trading on Thursday following the national day of mourning on Wednesday. The major averages are posting steep losses, extending the sharp pullback seen on Tuesday.

In recent trading, the Dow and the S&P 500 hit new lows for the session. The Dow is down 613.65 points or 2.5 percent at 24,413.42, the Nasdaq is down 130.91 points or 1.8 percent at 7,027.52 and the S&P 500 is down 61.11 points or 2.3 percent at 2,738.95.

The continued sell-off on Wall Street reflects skepticism about the potential for a long-term trade agreement between the U.S. and China after the arrest of a top executive at Chinese tech giant Huawei.

Huawei CFO Meng Wanzhou was arrested in Canada on suspicion of violating U.S. trade sanctions against Iran and faces possible extradition to the U.S.

The development has added to uncertainty about whether the 90-day trade truce negotiated by President Donald Trump and Chinese President Xi Jinping will give the two sides enough time to reach a long-term deal.

Traders are also be reacting to a slew of U.S. economic data, as several reports originally due to be released on Wednesday were postponed for former President George H.W. Bush's funeral.

Payroll processor ADP released a report before the start of trading showing private sector employment increased by less than expected in the month of November.

ADP said private sector employment climbed by 179,000 jobs in November after jumping by a downwardly revised 225,000 jobs in October.

Economists had expected an increase of about 195,000 jobs compared to the addition of 227,000 jobs originally reported for the previous month.

"Job growth is strong, but has likely peaked," said Mark Zandi, chief economist of Moody's Analytics. "This month's report is free of significant weather effects and suggests slowing underlying job creation."

He added, "With very tight labor markets, and record unfilled positions, businesses will have an increasingly tough time adding to payrolls."

A separate report from the Labor Department showed first-time claims for U.S. unemployment benefits edged down by less than expected in the week ended December 1st.

The report said initial jobless claims slipped to 231,000, a decrease of 4,000 from the previous week's revised level of 235,000. Economists had expected jobless claims to dip to 225,000.

The Commerce Department also released a report showing the U.S. trade deficit widened to its highest level in ten years in the month of October.

The report said the trade deficit widened to $55.5 billion in October from a revised $54.6 billion in September. Economists had expected the trade deficit to widen to $55.0 billion.

Meanwhile, a report from the Institute for Supply Management unexpectedly showed an acceleration in the pace of growth in service sector activity in the month of November.

The ISM said its non-manufacturing index crept up to 60.7 in November after pulling back to 60.3 in October, with a reading above 50 indicating service sector growth. Economists had expected the index to dip to 59.2.

"The non-manufacturing sector continued to reflect strong growth in November," said Anthony Nieves, Chair of the ISM Non-Manufacturing Business Survey Committee. "However, concerns persist about employment resources and the impact of tariffs."

Most of the major sectors have moved to the downside on the day, although energy stocks are showing a particularly steep drop along with the price of crude oil.

Crude for February delivery is plunging $2.09 to $51.03 a barrel amid indications OPEC may reduce output by less than previously anticipated.

Reflecting the weakness in the energy sector, the Philadelphia Oil Service Index has plunged by 4.9 percent, the NYSE Arca Natural Gas Index is down by 3.9 percent and the NYSE Arca Oil Index is down by 3 percent.

Banking, chemical, steel and semiconductor stocks are also seeing significant weakness in morning trading, while gold stocks are among the few groups bucking the downtrend.

In overseas trading, stock markets across the Asia-Pacific region moved sharply lower during trading on Thursday. Japan's Nikkei 225 Index plummeted by 1.9 percent, while Hong Kong's Hang Seng Index nosedived by 2.5 percent.

The major European markets have also shown significant moves to the downside on the day. While the German DAX Index has plunged by 3.1 percent, the French CAC 40 Index is down by 3 percent and the U.K.'s FTSE 100 Index is down by 2.8 percent.

In the bond market, treasuries are extending the strong upward move seen over the past few sessions. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, is down by 8.6 basis points at 2.838 percent.

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