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U.S. Stocks Pull Back Sharply After Initially Extending Yesterday's Rebound

wallstreet down 040218 10sep20 lt

Stocks extended Wednesday's significant rebound early in the trading day on Thursday but pulled back sharply over the course of the session. With the downturn, the major averages largely offset the strong gains posted in the previous session.

The major averages climbed off their lows going into the close but still posted steep losses. The Dow tumbled 405.89 points or 1.5 percent to 27,534.58, the Nasdaq plummeted 221.97 points or 2 percent to 10,919.59 and the S&P 500 plunged 59.77 points or 1.8 percent to 3,339.19.

Strength among tech stocks contributed to the early advance on Wall Street, but they also helped to lead the subsequent pullback by the markets.

Apple (AAPL) has recently been a key driver of the markets, and the tech giant tumbled by 3.3 percent after jumping as much as 2.7 percent in early trading.

Netflix (NFLX), Amazon (AMZN), Microsoft (MSFT) and Facebook (FB) also came under pressure over the course of the session.

Potentially adding to the negative sentiment that emerged on Wall Street, Senate Republicans failed to advance a new coronavirus stimulus bill.

Facing unanimous opposition from Democrats, the bill was unable to clear a key procedural hurdle in the latest sign of the difficulty lawmakers have had in passing a new relief package.

On the U.S. economic front, the Labor Department released a report showing first-time claims for U.S. unemployment benefits unexpectedly came in unchanged in the week ended September 5th.

The Labor Department said initial jobless claims came in at 884,000, unchanged from the previous week's revised level. Economists had expected jobless claims to drop to 846,000 from the 881,000 originally reported for the previous week.

The report also showed an increase in continuing claims, a reading on the number of people receiving ongoing unemployment assistance.

A separate report from the Labor Department showed producer prices in the U.S. increased by slightly more than expected in the month of August.

The Labor Department said its producer price index for final demand rose by 0.3 percent in August after climbing by 0.6 percent in July. Economists had expected prices to edge up by 0.2 percent.

Excluding food and energy prices, core producer prices increased by 0.4 percent in August following a 0.5 percent advance in July. Core prices were also expected to tick up by 0.2 percent.

Sector News

Energy stocks moved sharply lower over the course of the session, with a decrease by the price of crude oil weighing on the sector.

Crude for October delivery fell $0.75 to $37.30 a barrel following the release of a report showing an unexpected weekly increase in crude oil inventories.

Reflecting the weakness in the energy sector, the NYSE Arca Oil Index and the NYSE Arca Natural Gas Index plunged by 4.2 percent and 4.1 percent, respectively, while the Philadelphia Oil Service Index plummeted by 3.7 percent.

Networking and computer hardware stocks also came under pressure amid the downturn by the broader tech sector, with the NYSE Arca Networking Index and the NYSE Arca Computer Hare Index tumbling by 2.9 percent and 2.3 percent, respectively.

Substantial weakness also emerged among retail stocks, as reflected by the 2.2 percent slump by the Dow Jones U.S. Retail Index.

Video game retailer GameStop (GME) posted a steep loss after reporting a wider than expected fiscal second quarter loss on revenues that came in below analyst estimates.

Software, biotechnology, steel and banking stocks also saw notable weakness, moving lower along with most of the other major sectors.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region turned in a mixed performance during trading on Thursday. Japan's Nikkei 225 Index advanced by 0.9 percent, while China's Shanghai Composite Index slid by 0.6 percent.

Meanwhile, the major European markets all moved modestly lower over the course of the session. While the French CAC 40 Index fell by 0.4 percent, the German DAX Index and the U.K.'s FTSE 100 Index both dipped by 0.2 percent.

In the bond market, treasuries showed a notable turnaround amid the sharp pullback on Wall Street. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, dipped 1.8 basis points to 0.685 percent after reaching a high of 0.723 percent.

Looking Ahead

A report on consumer price inflation may attract some attention on Friday but is unlikely to drive trading following the Federal Reserve's recent shift to average inflation targeting.

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