Nasdaq Pulls Back Sharply Amid Sell-Off By Tech Stocks

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Following the late-day rally seen in the previous session, stocks moved back to the downside during trading on Thursday. Technology stocks led the way lower, resulting in a particularly steep drop by the tech-heavy Nasdaq.

The Nasdaq plunged 385.15 points or 2.5 percent to 15,180.44 and the S&P 500 slumped 41.18 points or 0.9 percent to 4,668.67. Meanwhile, the Dow spent the afternoon bouncing back and forth across the unchanged line before closing down 29.79 points or 0.1 percent to 35,897.64.

The pull back on Wall Street as traders continued to digest the Federal Reserve's highly anticipated monetary policy announcement on Wednesday.

The Fed announced its widely expected decision to accelerate the pace of tapering its asset purchases and forecast as many as three interest rate hikes next year.

While some stocks benefited from reduced uncertainty about the outlook for monetary policy, high-growth tech stocks fell sharply amid concerns about the impact of higher interest rates.

Traders were also reacting to a slew of U.S. economic data, including a Labor Department report showing a modest rebound in first-time claims for unemployment benefits in the week ended December 11th.

The Labor Department said initial jobless claims rose to 206,000, an increase of 18,000 from the previous week's revised level of 188,000.

Economists had expected jobless claims to inch up to 195,000 from the 184,000 originally reported for the previous week.

The slightly bigger than expected increase came after jobless claims fell to their lowest level since 1969 in the previous week.

The Fed also released a report showing U.S. industrial production increased by less than expected in the month of November.

The report said industrial production rose by 0.5 percent in November after surging by an upwardly revised 1.7 percent in October.

Economists had expected industrial production to climb by 0.7 percent compared to the 1.6 percent jump originally reported for the previous month.

A separate report from the Commerce Department showed housing starts and building permits both surged by much more than expected in the month of November.

Meanwhile, the Philadelphia Federal Reserve released a report showing a substantial slowdown in the pace of growth in regional manufacturing activity in December.

Sector News

Semiconductor and software stocks turned in some of the market's worst performances on the day, contributing to the steep drop by the tech-heavy Nasdaq.

Reflecting the weakness in the sectors, the Philadelphia Semiconductor Index plunged by 4.3 percent and the Dow Jones U.S. Software Index plummeted by 3.4 percent.

Substantial weakness was also visible among airline stocks, as reflected by the 2.4 percent slump by the NYSE Arca Airline Index.

Networking, retail and housing stocks also saw considerable weakness on the day, while gold and steel stocks showed strong moves to the upside.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved mostly higher during trading on Thursday. Japan's Nikkei 225 Index spiked by 2.1 percent, while China's Shanghai Composite Index advanced by 0.8 percent.

The major European markets also moved to the upside on the day. While the U.K.'s FTSE 100 Index surged by 1.3 percent, the French CAC 40 Index and the German DAX Index jumped by 1.1 percent and 1 percent, respectively.

In the bond market, treasuries moved higher over the course of the session after seeing early weakness. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, fell by 4.1 basis points to 1.422 percent.

Looking Ahead

A lack of major U.S. economic data may keep some traders on the sidelines on Friday, as they continue to digest the Fed announcement.

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