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Stocks Recover From Early Weakness Before Closing Mixed - U.S. Commentary

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After recovering from an initial move to the downside, stocks showed a lack of direction over the course of the trading session on Thursday. The major averages eventually ended the session on opposite sides of the unchanged line.

The tech-heavy Nasdaq pulled back going into the close but still ended the day up 6.58 points or 0.1 percent to 7,426.95, while the Dow dropped 103.88 points 0.4 percent to 25,439.39 and the S&P 500 fell 7.30 points or 0.3 percent to 2,745.73.

The initial weakness on Wall Street came after a report from the Commerce Department unexpectedly showed a substantial decrease in retail sales in December, increasing the appeal of safe havens like bonds.

The Commerce Department said retail sales tumbled by 1.2 percent in December after inching up by a revised 0.1 percent in November.

Economists had expected retail sales to rise by 0.2 percent, matching the uptick originally reported for the previous month.

Excluding a jump in auto sales, retail sales plunged by an even steeper 1.8 percent in December after coming in unchanged in November. Ex-auto sales had been expected to edge up by 0.1 percent.

Sales by gas stations helped lead the way lower amid a drop in gasoline prices, plummeting by 5.1 percent in December following a 4.4 percent nosedive in November.

Underlying sales figures were also troubling, however, as closely watched core retail sales, which exclude autos, gasoline, building materials and food services, tumbled by 1.7 percent in December after an upwardly revised 1.0 percent jump in November.

Michael Pearce, Senior U.S. Economist at Capital Economics, said the data suggests the economy entered 2019 with much less momentum than anticipated.

"That doesn't mean the economy is falling into recession; after all, that decline is hard to square with the recent strength of payroll gains and the drop in energy prices in recent months," Pearce said.

He added, "But with the producer price data suggesting inflationary pressures remain contained, it strengthens the case for the Fed to remain 'patient' in the months ahead."

A separate Labor Department report showed producer prices in the U.S. unexpectedly edged lower in the month of January.

The Labor Department said its producer price index for final demand slipped by 0.1 percent for the second straight month in January. Economists had expected the index to inch up by 0.1 percent.

Excluding steep drops in food and energy prices, core producer prices increased by 0.3 percent in January after coming in unchanged in December. Core producer prices were expected to rise by 0.2 percent.

Reflecting the monthly decrease, the annual rate of producer price growth slowed to 2.5 percent in January from 2.8 percent in December.

The annual rate of growth in core producer prices also slipped to 2.6 percent in January from 2.7 percent in the previous month.

Selling pressure has waned over the course of the morning, as traders continued to express optimism about U.S.-China trade talks and avoiding another government shutdown.

Sector News

Reflecting the lackluster close by the broader markets, most of the major sectors ended the day showing only modest moves.

Gold stocks showed a strong move to the upside, however, with the NYSE Arca Gold Bugs Index climbing by 1.2 percent.

The strength among gold stocks came despite a modest decrease by the price of the precious metal, as gold for April delivery slipped $1.20 to $1,313.90 an ounce.

Networking and tobacco stocks also saw some strength on the day, while weakness was visible among banking and chemical stocks.

Other Markets

In overseas trading, most stock markets across the Asia-Pacific region turned in a lackluster performance during trading on Thursday. Japan's Nikkei 225 Index ended the day just below the unchanged line, while Hong Kong's Hang Seng Index edged down by 0.2 percent.

Meanwhile, the major European markets ended the day mixed. While the U.K.'s FTSE 100 Index inched up by 0.1 percent, the French CAC 40 Index dipped by 0.2 percent and the German DAX Index fell by 0.7 percent.

In the bond market, treasuries rebounded strongly 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, slid 5.1 basis points to 2.657 percent.

Looking Ahead

Economic data may remain in focus on Friday, with traders likely to keep an eye on reports on import and export prices, industrial production, and consumer sentiment.

On the earnings front, Applies Materials (AMAT), CBS Corp. (CBS) and Nvidia (NVDA) are among the companies releasing their quarterly results after the close of today's trading.

Deere & Co. (DE), Newell Brands (NWL) and PepsiCo (PEP) are also among the companies releasing their results before the start of trading on Friday.

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