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U.S. Stocks Showing Wild Swings Before Closing Modestly Higher

wallstreet aug27 24sep20 lt

After ending the previous session sharply lower, stocks showed wild swings over the course of the trading day on Thursday. The major averages spent the day bouncing back and forth across the unchanged line before closing modestly higher.

The Dow fell as much as 226 points and jumped as much as 331 points before ending the day up 52.31 points or 0.2 percent at 26,815.44. The Nasdaq climbed 39.28 points or 0.4 percent to 10,672.27 and the S&P 500 rose 9.67 points or 0.3 percent at 3,246.59.

The choppy trading on Wall Street came following the release of a mixed batch of U.S. economic data, which added to recent uncertainty about the economic outlook.

Before the start of trading, the Labor Department released a report showing an unexpected uptick in first-time claims for U.S. unemployment benefits in the week ended September 19th.

The report said initial jobless claims inched up to 870,000, an increase of 4,000 from the previous week's revised level of 866,000.

The modest increase surprised economists, who had expected jobless claims to drop to 843,000 from the 860,000 originally reported for the previous week.

Meanwhile, the Commerce Department released a separate report unexpectedly showing another significant increase in new home sales in the U.S. in the month of August.

The Commerce Department said new home sales jumped by 4.8 percent to an annual rate of 1.011 million in August after skyrocketing by 14.7 percent to an upwardly revised rate of 965,000 in July.

Economists had expected new home sales to pull back by 1.2 percent to a rate of 890,000 from the 901,000 originally reported for the previous month.

With the unexpected increase, new home sales surged up to their highest level since reaching 1.016 million in September of 2006.

Uncertainty about the global economic outlook has recently resurfaced as Europe grapples with a second wave of coronavirus infections.

Recent data has suggested the economic recovery in the U.S. may be plateauing, leading to calls by officials such as Federal Reserve Chair Jerome Powell for more fiscal stimulus.

However, with the elections looming, lawmakers are expected to continue to have difficulty reaching an agreement on a new coronavirus relief bill.

House Democrats reportedly plan to unveil a new $2.4 trillion relief bill in the coming days, although Republicans may continue to balk at the price target despite a $1 trillion reduction.

Sector News

Reflecting the lackluster performance by the broader markets, most of the major sectors ended the day showing only modest moves.

Gold stocks showed a significant move to the upside, however, with the NYSE Arca Gold Bugs Index surging up by 3.5 percent after plunging by 6.3 percent to its lowest closing level in over two months on Wednesday.

The rebound by gold stocks came amid an increase by the price of the precious metal, as gold for December delivery climbed $8.50 to $1,876.90 an ounce.

Considerable strength was also visible among tobacco stocks, resulting in a 2.2 percent jump by the NYSE Arca Tobacco Index. The index rebounded after ending the previous session at its lowest closing level in well over two months.

Utilities stocks also turned in a strong performance, with the Dow Jones Utilities Average climbing by 1.4 percent after hitting a two-month intraday low in early trading.

On the other hand, oil service stocks moved sharply lower on the day, dragging the Philadelphia Oil Service Index down by 3 percent to a four-month closing low.

The continued weakness among oil service stocks came despite an increase by the price of crude oil, as crude for November delivery rose $0.38 to $40.31 a barrel.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved mostly lower during trading on Thursday. Japan's Nikkei 225 Index slumped by 1.1 percent, while China's Shanghai Composite Index plunged by 1.7 percent.

The major European markets also moved to the downside on the day. While the U.K.'s FTSE 100 Index tumbled by 1.3 percent, the French CAC 40 Index slid by 0.8 percent and the German DAX Index fell by 0.3 percent.

In the bond market, treasuries turned in a lackluster performance before ending the session slightly higher. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, edged down by 1 basis point to 0.666 percent.

Looking Ahead

Trading on Friday may be impacted by reaction to the Commerce Department's report on durable goods orders in the month of August.

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