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U.S. Stocks See Further Downside After Early Pullback

wallstreet sept06 25feb21 lt

Stocks have moved sharply lower over the course of the trading day on Thursday, offsetting the rally seen in the previous session. The major averages have all moved to the downside, with the tech-heavy Nasdaq showing a particularly steep drop.

Currently, the major averages are just off their worst levels of the day. The Dow is down 298.97 points or 0.9 percent at 31,662.89, the Nasdaq is down 286.29 points or 2.1 percent at 13,311.68 and the S&P 500 is down 54.31 points or 1.4 percent at 3,871.12.

The sell-off on Wall Street may partly reflect profit taking following yesterday's rally, which lifted the Dow to a new record closing high.

Traders also remain concerned about a continued increase in bond yields, with yields on ten-year notes and thirty-year bonds once again reaching their highest intraday levels in a year.

The increase in yields comes following the release of a batch of largely upbeat U.S. economic data, including a report from the Labor Department showed a steep drop in first-time claims for U.S. unemployment benefits in the week ended February 20th.

The Labor Department said initial jobless claims tumbled to 730,000, a decrease of 111,000 from the previous week's revised level of 841,000.

Economists had expected jobless claims to drop to 838,000 from the 861,000 originally reported for the previous week.

With the much bigger than expected decrease, jobless claims fell to their lowest level since hitting 716,000 in the week ended November 28th.

The Commerce Department also released a report showing new orders for U.S. manufactured durable goods spiked by much more than expected in the month of January.

The report said durable goods orders soared by 3.4 percent in January after jumping by an upwardly revised 1.2 percent in December.

Economists had expected durable goods orders to surge up by 1.1 percent compared to the 0.5 percent increase that had been reported for the previous month.

Excluding a sharp increase in orders for transportation equipment, durable goods orders still jumped by 1.4 percent in January after spiking by an upwardly revised 1.7 percent in December.

Ex-transportation orders had been expected to climb by 0.7 percent, matching the increase that had been reported for the previous month.

A separate report released by the Commerce Department showed U.S. gross domestic product jumped by slightly more than originally estimated in the fourth quarter of 2020.

The Commerce Department said GDP surged up by 4.1 percent in the fourth quarter compared to the previously reported 4.0 percent spike. The upward revision matched economist estimates.

Sector News

Airline stocks have pulled back sharply after soaring over the past few sessions, resulting in a 3.9 percent nosedive by the NYSE Arca Airline Index. The index ended the previous session at its best closing level in a year.

Reflecting weakness in the broader tech sector, semiconductor and computer hardware stocks are also posting steep losses, with the Philadelphia Semiconductor Index and the NYSE Arca Computer Hardware Index plunging by 3.5 percent and 2.9 percent, respectively.

Substantial weakness has also emerged among housing stocks, as reflected by the 2.8 percent slump by the Philadelphia Housing Sector Index.

The sell-off by housing stocks comes after the National Association of Realtors released a report showing a steep drop in U.S. pending home sales in the month of January, with inventory constraints continuing to hold back prospective buyers.

Gold stocks are also seeing considerable weakness amid a steep drop by the price of the precious metal, moving notably lower along with software, biotechnology and retail stocks.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved mostly higher during trading on Thursday. Japan's Nikkei 225 Index shot up by 1.7 percent, while South Korea's Kospi spiked by 3.5 percent.

Meanwhile, the major European markets moved to the downside on the day. While the German DAX Index slid by 0.7 percent, the French CAC 40 Index dipped by 0.2 percent and the U.K.'s FTSE 100 Index edged down by 0.1 percent.

In the bond market, treasuries have climbed off their worst levels but continue to see notable weakness. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, is up by 6.9 basis points at 1.458 percent.

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