U.S. Stocks Fluctuate After Early Sell-Off But Remain Firmly Negative

wallstreet aug27 30jun22 lt

Stocks fluctuated after an early sell-off on Thursday but maintained a negative bias throughout the session. The major averages all finished the day notably lower after ending Wednesday's trading narrowly mixed.

After falling nearly 600 points in early trading, the Dow regained some ground but still closed down 253.88 points or 0.8 percent at 30,775.43. The Nasdaq also tumbled 149.16 points or 1.3 percent to 11,028.74, while the S&P 500 slumped 33.45 points or 0.9 percent to 3,785.38.

The steep drop on the day capped off the worst first half for the S&P 500 since 1970, with the index plummeting by 20.6 percent.

The early sell-off on Wall Street came amid lingering concerns about the global economic outlook and the possibility of a recession.

Central bank chiefs have recently reaffirmed their resolve to bring down inflation despite threats to economic growth.

A report from the Commerce Department provided further evidence of an economic slowdown, showing personal spending increased by less than expected in the month of May.

The Commerce Department personal spending edged up by 0.2 percent in May after climbing by a downwardly revised 0.6 percent in April.

Economists had expected personal spending to increase by 0.5 percent compared to the 0.9 percent advance originally reported for the previous month.

Real personal spending, which excludes price changes, fell by 0.4 percent in May after rising by 0.3 percent in April.

"The larger than expected 0.4% fall in real consumption in May, together with downward revisions to gains in previous months, means we now expect consumption to rise by just 0.8% annualized in the second quarter, down sharply from our previous estimate of close to 3.0%," said Michael Pearce, Senior U.S. Economist at Capital Economics.

He added, "As a result, second quarter GDP growth is now on track to be closer to 1.0% annualized, down from our previous estimate of 2.7%, and we expect growth to remain below trend over the second half of the year too."

While the report also showed a slowdown in the annual rate of core consumer price growth, Pearce said the data does not present the "clear and compelling" evidence the Federal Reserve needs to shift to less aggressive rate hikes.

Selling pressure waned over the course of the session, however, with some traders using the early weakness as an opportunity to pick up stocks at reduced levels.

Sector News

Gold stocks moved sharply lower over the course of the session, dragging the NYSE Arca Gold Bugs Index down by 4.3 percent to its lowest closing level in over two years.

The sell-off by gold stocks came amid a decrease by the price of the precious metal, with gold for August delivery falling $10.20 to $1,807.30 an ounce.

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

Energy stocks also showed significant moves to the downside as the price of crude oil for August delivery plunged $4.02 to $105.76 a barrel.

Financial, retail and computer hardware stocks also saw considerable weakness on the day, while utilities stocks bucked the downtrend.

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 1.5 percent, while China's Shanghai Composite Index jumped by 1.1 percent.

Meanwhile, the major European markets all moved sharply lower on the day. While the U.K.'s FTSE 100 Index plunged by 2 percent, the French CAC 40 Index and the German DAX Index tumbled by 1.8 percent and 1.7 percent, respectively.

In the bond market, treasuries extended the strong upward move seen in the previous session. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, tumbled 12.1 basis points to 2.972 percent.

Looking Ahead

Trading on Friday may be impacted by reaction to reports on manufacturing activity and construction spending, although activity may be somewhat subdued ahead of the long weekend.

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