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U.S. Stocks Turn Mixed After Seeing Initial Strength

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After an initial move to the upside, stocks have turned mixed over the course of morning trading on Thursday. While the Dow is holding on to a moderate gain, the Nasdaq has pulled back into negative territory and the S&P 500 is nearly flat.

Currently, the major averages remain on opposite sides of the unchanged. The Nasdaq is down 7.88 points or 0.1 percent at 8,194.65, but the Dow is up 106.91 points or 0.4 percent at 26,967.11 and the S&P 500 is up 0.48 points or less than a tenth of a percent at 2,993.55.

The Dow is benefiting from a significant advance by shares of UnitedHealth (UNH), which is jumping along with other health insurers on news President Donald Trump is abandoning a plan to eliminate rebates from government drug plans.

The proposal was the centerpiece of Trump's blueprint to lower drug costs but faced stiff resistance from pharmacy-benefit managers.

On the other hand, biotechnology and pharmaceutical stocks have moved sharply lower on the news, with the NYSE Arca Biotechnology Index and the NYSE Arca Pharmaceutical Index tumbling by 2 percent and 1.9 percent.

Housing stocks have also come under pressure over the course of the morning, dragging the Philadelphia Housing Sector Index down by 1.1 percent.

Most of the other major sectors are showing only modest moves, contributing to the lackluster performance by the broader markets.

In U.S. economic news, the Labor Department released a report before the start of trading showing an unexpected uptick in U.S. consumer prices in the month of June.

The Labor Department said its consumer price index inched up by 0.1 percent in June, matching the slight increase seen in May. Economists had expected consumer prices to come in unchanged.

Excluding food and energy prices, core consumer prices rose by 0.3 percent in June after inching up by 0.1 percent for four consecutive months. Core prices had been expected to edge up by 0.2 percent.

Andrew Hunter, Senior U.S. Economist at Capital Economics, does not expect the stronger than expected core consumer price growth to prevent the Federal Reserve from cutting interest rates later this month and expressed doubt the strength will be sustained.

"Higher tariffs could yet put some further upward pressure on core goods prices over the coming months but, with growth in unit labor costs slowing, we still think core CPI inflation will remain muted," Hunter said.

He added, "With the latest surveys pointing to a sharp slowdown in activity growth, we expect the Fed to follow a 25bp rate cut this month with further cuts in December and March next year."

A separate Labor Department report showed first-time claims for U.S. unemployment benefits unexpectedly fell in the week ended July 6th.

The report said initial jobless claims dropped to 209,000, a decrease of 13,000 from the previous week's revised level of 222,000. Economists had expected jobless claims to inch up to 223,000.

In overseas trading, stock markets across the Asia-Pacific region moved mostly higher during trading on Thursday. Japan's Nikkei 225 Index climbed by 0.5 percent, while Hong Kong's Hang Seng Index advanced by 0.8 percent.

Meanwhile, the major European markets have moved lower over the course of the session. While the French CAC 40 Index has edged down by 0.1 percent, the German DAX Index is down by 0.2 percent and the U.K.'s FTSE 100 Index is down by 0.3 percent.

In the bond market, treasuries have moved to the downside after ending the previous session roughly flat. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, is up by 2.5 basis points at 2.086 percent.

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