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U.S. Stocks Seeing Further Downside After Initial Sell-Off

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After moving sharply lower at the start of trading on Wednesday, stocks have seen some further downside over the course of the session. With the pullback, the major averages are more than offsetting the strong gains posted in the previous session.

In recent trading, the major averages have once again fallen to new lows for the session. The Dow is down 632.94 points or 2.4 percent at 25,646.97, the Nasdaq is down 226.23 points or 2.8 percent at 7,790.13 and the S&P 500 is down 71.64 points or 2.5 percent at 2,854.68.

The sell-off on Wall Street comes amid concerns about a potential recession after the yield on the benchmark ten-year note dropped below the yield on the two-year note.

The inversion is widely seen as an indicator of a recession, although data from Credit Suisse shows the economic downturn typically does not occur until almost two years later.

The yield on the closely watched thirty-year bond has also shown a notable decrease, tumbling to a new record intraday low.

The strength among treasuries and the subsequent drop in yields comes as a disappointing batch of Chinese economic data has led to renewed concerns about the global economy, leading traders to seek safe havens such as bonds.

Traders will be given a clearer picture of the strength of the U.S. economy with the release of an avalanche of economic data on Thursday.

Reports on weekly jobless claims, retail sales, and industrial production are likely to be in the spotlight, although data on regional manufacturing activity, labor productivity and costs, business inventories, and homebuilder confidence may also attract attention.

The Labor Department released a report this morning showing import prices in the U.S. unexpectedly showed a modest increase in the month of July.

Import prices rose by 0.2 percent in July after plunging by a revised 1.1 percent in June, while economists had expected import prices to come in unchanged.

The report also showed an unexpected uptick in export prices, which crept up by 0.2 percent in July after falling by a revised 0.6 percent in June. Export prices had also been expected to come in unchanged.

Sector News

Energy stocks continue to turn in some of the market's worst performances amid a steep drop by the price of crude oil. Crude for September delivery is plunging $2.78 to $54.32 a barrel amid concerns about global energy demand.

Reflecting the weakness in the energy sector, the Philadelphia Oil Service Index has plummeted by 5.7 percent, the NYSE Arca Natural Gas Index is down by 3.9 percent and the NYSE Arca Oil Index is down by 3.1 percent.

Worries about the outlook for global demand have also contributed to a substantial pullback by steel stocks, with the NYSE Arca Steel Index tumbling by 3.7 percent.

Banking stocks have also moved sharply lower amid the drop in bond yields, dragging the KBW Bank Index down by 3.4 percent to a seven-month intraday low.

Technology, brokerage, retail and chemical stocks are also seeing considerable weakness amid the broad based sell-off on Wall Street.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved mostly higher during trading on Wednesday. Japan's Nikkei 225 Index shot up by 1 percent, while China's Shanghai Composite Index rose by 0.4 percent.

Meanwhile, the major European markets showed significant moves to the downside on the day. While the U.K.'s FTSE 100 Index tumbled by 1.4 percent, the French CAC 40 Index and the German DAX Index plunged by 2.1 percent and 2.2 percent, respectively.

In the bond market, treasuries continue to see notable strength after an initial jump. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, is down by 8.9 basis points at 1.591 percent.

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