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Stocks Seeing Modest Weakness Following Recent Strength - U.S. Commentary

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Stocks are seeing moderate weakness in morning trading on Thursday, giving back ground following recent strength on Wall Street. The major averages have all moved to the downside after closing higher for four consecutive sessions.

In recent trading, the major averages have climbed off their worst levels of the day, but they currently remain in the red. The Dow is down 40.06 points or 0.2 percent at 23,839.06, the Nasdaq is down 12.45 points or 0.2 percent at 6,944.62 and the S&P 500 is down 7.30 points or 0.3 percent at 2,577.66.

While optimism about trade talks between the U.S. and China contributed to the recent strength on Wall Street, traders are cashing in on the gains as assessments of the three-day meetings showed no significant breakthroughs.

A statement from the office of U.S. Trade Representative Robert Lighthizer said the meetings were held as part of an agreement between President Donald Trump and Chinese President Xi Jinping to engage in 90 days of negotiations with a view to achieving needed structural changes in China.

The statement said the talks included discussions on China's pledge to purchase a substantial amount of U.S. goods and services but did not provide details about the tone or outcome of the meetings.

"The United States officials conveyed President Trump's commitment to addressing our persistent trade deficit and to resolving structural issues in order to improve trade between our countries," the statement said.

The statement indicated the delegation led by Deputy U.S. Trade Representative Jeffrey Gerrish will now report back to receive guidance on the next steps.

Meanwhile, a statement from China's Commerce Ministry described the talks as "extensive, in-depth and detailed" and said the meetings "laid a foundation for the resolution of each others' concerns."

The comments do not dash hopes for a long-term trade deal between the U.S. and China, but traders were likely looking more concrete results.

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 January 5th.

The report said initial jobless claims fell to 216,000, a decrease of 17,000 from the previous week's revised level of 233,000.

Economists had expected jobless claims to dip to 225,000 from the 231.000 originally reported for the previous week.

Later this afternoon, traders are likely to keep a close eye on remarks by Federal Reserve Chairman Jerome Powell at the Economic Club of Washington.

Transportation stocks have shown a significant move to the downside in morning trading, dragging the Dow Jones Transportation Average down by 1.5 percent. The average is pulling back off its best closing level in nearly a month.

Retail, steel, and energy stocks are also seeing notable weakness on the day, while most of the other major sectors are showing more modest moves.

In overseas trading, stock markets across the Asia-Pacific region turned in a mixed performance during trading on Thursday. Japan's Nikkei 225 Index slumped by 1.3 percent, while Hong Kong's Hang Seng Index edged up by 0.2 percent.

The major European markets have also turned mixed on the day. While the U.K.'s FTSE 100 Index has inched up by 0.1 percent, the German DAX Index is down by 0.1 percent and the French CAC 40 Index is down by 0.5 percent.

In the bond market, treasuries are rebounding after trending lower 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 1.6 basis points at 2.712 percent.

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