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U.S. Stocks Climb Off Worst Levels But Remain Mostly Negative

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After coming under pressure early in the session, stocks have regained some ground going into afternoon trading on Thursday. The major averages have climbed off their lows of the session, with the Dow briefly peeking back above the unchanged line.

Currently, the major averages are all in negative territory. The Dow is down 14.41 points or 0.1 percent at 26,188.32, the Nasdaq is down 56.03 points or 0.7 percent at 7,964.18 and the S&P 500 is down 9.69 points or 0.3 percent at 2,914.74.

The early downturn by stocks came amid another inversion of the yield curve, with the yield on the two-year note dropping below the yield on the ten-year note.

The yield curve inversion, an indicator of a looming recession, comes after the minutes of the Federal Reserve's latest monetary policy meeting failed to provide much clarity about the outlook for interest rates.

The minutes said the Fed intends to remain flexible regarding future changes to rates, with members planning to pay close attention to the implications of incoming data for the economic outlook.

During the meeting last month, the members of the Fed voted 8 to 2 to lower the target range for the federal funds rate by 25 basis points to 2 to 2-1/4 percent.

The decision to lower rates came even though participants generally judged that downside risks to the outlook for economic activity had diminished somewhat since their June meeting.

However, the Fed noted that financial conditions appeared to be "premised importantly" on expectations that the central bank would cut rates.

Michael Pearce, Senior U.S. Economist at Capital Economics, said the Fed minutes left the impression policymakers are just taking their cue from the bond markets.

Traders are likely to keep a close eye on Fed Chairman Jerome Powell's speech at the Jackson Hole Economic Policy Symposium on Friday for additional clues about the outlook for rates.

"We will hopefully get more clarity on future rate cuts when Powell speaks on Friday but, at this point, there is little sign that the Fed is willing to push back on the markets," Pearce said.

He added, "As such, another 25bp cut in September still looks like a good bet, if only because the Fed will not want to disappoint lofty market expectations."

On the U.S. economic front, the Labor Department released a report before the start of trading showing first-time claims for unemployment benefits fell by much more than expected in the week ended August 17th.

The report said initial jobless claims dropped to 209,000, a decrease of 12,000 from the previous week's revised level of 221,000. Economists had expected jobless claims to dip to 216,000.

A separate report released by the Conference Board showed its reading on leading U.S. economic indicators rose by much more than anticipated in the month of July.

The Conference Board said its leading economic index climbed by 0.5 percent in July after edging down by 0.1 percent in both May and June.

Ataman Ozyildirim, Senior Director of Economic Research at the Conference Board, said the leading economic index suggests the economy will continue to expand in the second half of 2019 but noted "it is likely to do so at a moderate pace."

Sector News

Biotechnology stocks have moved sharply lower over the course of the trading session, dragging the NYSE Arca Biotechnology Index down by 2.1 percent.

Notable weakness has also emerged among software stocks, as reflected by the 1.4 percent slump by the Dow Jones U.S. Software Index. The index jumped by 1.3 percent on Wednesday.

On the other hand, computer hardware stocks have shown a strong move to the upside on the day, driving the NYSE Arca Computer Hardware Index up by 1.1 percent.

Pure Storage (PSTG) is posting a standout gain after the flash storage provider reported an unexpected second quarter profit.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region turned in another mixed performance during trading on Thursday. Japan's Nikkei 225 Index inched up by 0.1 percent, while Hong Kong's Hang Seng Index slid by 0.8 percent.

Meanwhile, the major European markets all moved to the downside on the day. While the U.K.'s FTSE 100 Index tumbled by 1.1 percent, the French CAC 40 Index slumped by 0.9 percent and the German DAX Index fell by 0.5 percent.

In the bond market, treasuries have climbed off their worst levels but remain in the red. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, is up by 2.1 basis points at 1.598 percent.

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