U.S. Stocks Close Mostly Lower But Nasdaq Bucks Downtrend

wallstreet aug20 04aug21 lt

Stocks moved mostly lower during trading on Wednesday, although the tech-heavy Nasdaq bucked the downtrend. The Dow slid firmly into negative territory, while the S&P 500 pulled back off Tuesday's record closing high.

The Dow slumped 323.73 points or 0.9 percent to 34,792.67 and the S&P 500 fell 20.49 points or 0.5 percent to 4,402.66. Meanwhile, the Nasdaq spent most of the day lingering near the unchanged line before closing up 19.24 points or 0.1 percent at 14,780.53.

The weakness on Wall Street partly reflect renewed concerns about the pace of U.S. economic growth after payroll processor ADP released a report showing private sector employment increased by much less than expected in the month of July.

ADP said private sector employment rose by 330,000 jobs in July after surging by a downwardly revised 680,000 jobs in June.

Economists had expected private sector employment to spike by 695,000 jobs compared to the jump of 692,000 jobs originally reported for the previous month.

On Friday, the Labor Department is scheduled to release its more closely watched monthly jobs report, which includes both public and private sector jobs.

Economists currently expect the report to show employment surged up by 880,000 jobs in July after spiking by 850,000 jobs in June. The unemployment rate is expected to dip to 5.7 percent from 5.9 percent.

A steep drop by shares of General Motors (GM) also weighed on Wall Street, with the auto giant plunging by 8.9 percent to a five-month closing low.

The decline by GM came after the company reported second quarter earnings missed analyst estimates, although the automaker still raised its full-year guidance.

The negative sentiment was partly offset by a report from the Institute for Supply management showing growth in U.S. service sector activity accelerated much more than expected in July.

The ISM said its services PMI jumped to an all-time high of 64.1 in July after pulling back to 60.1 in June, with a reading above 50 indicating growth in the sector. Economists had expected the index to inch up to 60.4.

Sector News

Oil service stocks showed a substantial move to the downside on the day, resulting in a 6.4 percent nosedive by the Philadelphia Oil Service Index. The index ended the session at its lowest closing level in over three months.

The sell-off by oil service stocks came as the price of crude oil for September delivery plunged $2.41 to $68.15 a barrel following the release of a report showing an unexpected weekly increase in crude oil inventories.

The drop in crude oil prices also weighed on oil producer stocks, with the NYSE Arca Oil Index tumbling by 3.6 percent.

Airline stocks also saw significant weakness on the day, as reflected by the 2.4 percent slump by the NYSE Arca Airline Index.

Housing, tobacco and telecom stocks also showed notable moves to the downside, while strength among biotechnology and semiconductor stocks contributed to the uptick by the Nasdaq.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved mostly higher on Wednesday, although Japan's Nikkei 225 Index bucked the uptrend and dipped by 0.2 percent. China's Shanghai Composite Index and Hong Kong's Hang Seng Index both advanced by 0.9 percent.

The major European markets also moved to the upside on the day. While the German DAX Index jumped by 0.9 percent, the French CAC 40 Index and the U.K.'s FTSE 100 Index both rose 0.3 percent.

In the bond market, treasuries showed wild swings in morning trading before ending the session roughly flat. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, inched up by less than a basis point to 1.184 percent.

Looking Ahead

Reports on initial jobless claims and the U.S. trade deficit are likely to attract some attention on Thursday, although trading activity may be somewhat subdued ahead of the closely watched monthly jobs report on Friday.

Meanwhile, Allstate (ALL), Electronic Arts (EA), Etsy (ETSY) Hostess Brands (TWNK) Metlife (MET), Uber (UBER) and Western Digital (WDC) are among the companies releasing their quarterly results after the close of today's trading.

Cardinal Health (CAH), Cigna (CI), Hanesbrands (HBI), Papa John's (PZZA) and ViacomCBS (VIAC) are also among the companies due to report their results before the start of trading on Thursday.

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