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U.S. Stocks Close Mostly Lower Amid Worries About Economic Outlook

wallstreet sept06 17sep20 lt

Following the sharp pullback seen late in the previous session, stocks saw some further downside during trading on Thursday. The major averages all moved lower on the day, with the tech-heavy Nasdaq posting a particularly steep loss.

The major averages ended the session off their worst levels of the day but still firmly in the red. The Dow fell 130.40 points or 0.5 percent to 27,901.98, the Nasdaq tumbled 140.19 points or 1.3 percent to 10,910.28 and the S&P 500 slumped 28.48 points or 0.8 percent to 3,357.01.

The weakness on Wall Street came as stocks extended the sell-off seen on Wednesday after the Federal Reserve revealed plans to leave interest rates at near-zero levels for years to come.

The Fed's dovish monetary policy announcement was expected to help calm the markets, although investors seem to be viewing the central bank's projections as a sign the economic recovery will not be as swift as many were hoping.

In his post-meeting press conference, Fed Chair Jerome Powell cautioned that the pace of the recovery is expected to slow and called for fiscal stimulus from Congress.

However, lawmakers have remained at an impasse over a new coronavirus stimulus bill for weeks, and the upcoming elections could make reaching a compromise more difficult.

Negative sentiment was also generated in reaction to a report from the Labor Department showing first-time claims for U.S. unemployment benefits fell less than expected in the week ended September 12th.

The Labor Department said initial jobless claims slipped to 860,000, a decrease of 33,000 from the previous week's revised level of 893,000.

Economists had expected jobless claims to dip to 850,000 from the 884,000 originally reported for the previous week.

The Commerce Department also released a report showing new residential construction pulled back by much more than expected in the month of August.

The report said housing starts tumbled by 5.1 percent to an annual rate of 1.416 million in August after soaring by 17.9 percent to a revised rate of 1.492 million in July.

Economists had expected housing starts to pullback by 1.2 percent to a rate of 1.478 million from the 1.496 million originally reported for the previous month.

The Labor Department said building permits also fell by 0.9 percent to an annual rate of 1.470 million in August after spiking by 17.9 percent to a revised rate of 1.483 million in July.

Building permits, an indicator of future housing demand, had been expected to increase by 1.7 percent to a rate of 1.520 million from the 1.495 million originally reported for the previous month.

A separate report from the Federal Reserve Bank of Philadelphia showed a modest slowdown in the pace of growth in regional manufacturing activity.

Sector News

Interest rate-sensitive commercial real estate stocks showed a substantial move to the downside despite the Fed's pledge for persistently low rates, dragging the Dow Jones U.S. Real Estate Index down by 1.9 percent.

Significant weakness was also visible among gold stocks, as reflected by the 1.7 percent drop by the NYSE Arca Gold Bugs Index

The weakness in the gold sector came amid a sharp decline by the price of the precious metal, with gold for December delivery plunging $20.60 to $1,949.90 an ounce.

Airline stocks also saw considerable weakness on the day, resulting in a 1.7 percent slump by the NYSE Arca Airline Index. The index ended the previous session at its best closing level in over three months.

Retail, tobacco, and telecom stocks also showed notable moves to the downside on the day, while steel stocks bucked the downtrend.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved mostly lower during trading on Thursday. Japan's Nikkei 225 Index declined by 0.7 percent, while China's Shanghai Composite Index fell by 0.4 percent.

The major European markets also moved to the downside on the day. While the French CAC 40 Index slid by 0.7 percent, the U.K.'s FTSE 100 Index and the German DAX Index dipped by 0.5 percent and 0.4 percent, respectively.

In the bond market, treasuries pulled back near the unchanged line after seeing early strength. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, edged down by less than a basis point to 0.684 percent.

Looking Ahead

The economic calendar is relatively quiet on Friday following today's batch of data, although a report on consumer sentiment in September may still attract some attention.

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