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Nasdaq Shows Notable Rebound But Dow Extends Downward Trend

wallst 032918 17jun21 lt

Stocks turned in a mixed performance during trading on Thursday following the broad-based weakness seen in the previous session. The tech-heavy Nasdaq showed a notable rebound, while the Dow extended a recent downward trend.

The major averages ended the day on opposite sides of the unchanged line. While the Nasdaq advanced 121.67 points or 0.9 percent to 14,161.35, the Dow slid 210.22 points or 0.6 percent to 33,823.45 and the S&P 500 edged down 1.84 points or less than a tenth of a percent to 4,221.86.

With the drop on the day, the Dow closed lower for the fourth consecutive session, ending the day at its lowest closing level in a month.

The mixed performance on Wall Street came as traders moved out of cyclicals and into tech stocks following yesterday's announcement from the Federal Reserve, which saw the central bank move up its timeline for raising interest rates.

The Fed previously predicted that interest rates would remain at near-zero levels through 2023, but the latest projections point to two rate hikes during that year.

The shift in the timeline comes as the Fed also forecast much faster core consumer price inflation this year, although the accompanying statement still attributed the increase in inflation to "transitory factors."

The statement did not hint at a shift in Fed officials' thinking about the central bank's asset purchase program, but the new interest rate forecast still suggests tapering is likely in the coming months.

The Fed's asset purchase program has been credited with helping to prop up the stock markets during the coronavirus pandemic, with stocks reaching record highs despite significant economic hardship.

On the economic front, the Labor Department released a report showing an unexpected uptick in initial jobless claims in the week ended June 12th.

The report said initial jobless claims rose to 412,000, an increase of 37,000 from the previous week's revised level of 375,000.

The increase surprised economists, who had expected jobless claims to edge down to 359,000 from the 376,000 originally reported for the previous week.

Jobless claims had declined in eight out of the nine previous weeks, falling to their lowest levels since March of 2020.

A separate report from the Federal Reserve Bank of Philadelphia showed Philadelphia-area manufacturing activity expanded at a slightly slower rate in the month of June.

Meanwhile, the Conference Board released a separate report showing another significant increase by its index of leading U.S. economic indicators.

Sector News

Gold stocks showed a substantial move to the downside on the day, dragging the NYSE Arca Gold Bugs Index down by 5.9 percent to its lowest closing level in well over a month.

The sell-off by gold stocks came amid a steep drop by the price of the precious metal, with gold for August delivery plummeting $86.60 to $1,774.80 an ounce.

A sharp decline by the price of crude oil also weighed on energy stocks, as crude for July delivery tumbled $1.11 to $71.04 a barrel.

Reflecting the weakness in the energy sector, the Philadelphia Oil Service Index plunged by 5.6 percent, while the NYSE Arca Natural Gas Index and the NYSE Arca Oil Index slumped by 3.4 percent and 3.3 percent, respectively.

Banking, steel and transportation stocks also saw considerable weakness on the day, while notable strength among software and semiconductor stocks contributed to the advance by the tech-heavy Nasdaq.

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 slumped by 0.9 percent, while China's Shanghai Composite Index crept up by 0.2 percent.

The major European markets also ended the day mixed. While the U.K.'s FTSE 100 Index fell by 0.4 percent, the German DAX Index inched up by 0.1 percent and the French CAC 40 Index rose by 0.2 percent.

In the bond market, treasuries showed a notable rebound after coming under pressure following the Fed announcement. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, fell by 5.8 basis points to 1.511 percent.

Looking Ahead

Following the Fed announcement and a slew of U.S. economic earlier this week, trading on Friday may be somewhat subdued amid a relatively quiet day.

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