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Interest Rates Concerns Continue To Weigh On Wall Street

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Stocks once again saw late-day fluctuations but ended Thursday's trading mostly lower, adding to the steep losses posted in the previous session. The Dow and the S&P 500 fell to three-month closing lows, while the Nasdaq slid to its lowest closing level in well over two months.

The major averages all closed in negative territory, although the Dow posted a relatively modest loss. While the Dow dipped 107.10 points or 0.4 percent to 30,076.68, the S&P 500 shed 31.94 points or 0.8 percent to 3,757.99 and the Nasdaq tumbled 153.39 points or 1.4 percent to 11,066.81.

The weakness on Wall Street reflected continued concerns about the economic outlook following the Federal Reserve's third straight 75 basis point interest rate hike on Wednesday.

While the Fed's economic projections provided a clearer outlook for future rate hikes, traders remain concerned about the impact the aggressive rate increases will have on the economy.

Several other central banks around the world followed the Fed's lead, including the Bank of England, which raised interest rates by 50 basis points in a split decision.

"Global equities are struggling as the world anticipates surging rates will trigger a much sooner and possibly severe global recession," said Edward Moya, senior market analyst at OANDA.

He added, "Most of these rate hikes around the world are not done yet which means the race to restrictive territory won't be over until closer to the end of the year."

The next Fed meeting is over a month away, giving traders a lot of time to analyze incoming economic data and try to determine the effect of the recent string of rate hikes.

Reports on inflation and the labor market are likely to be in focus in the coming weeks, as traders look for signs the Fed could alter the aggressive plan that has been laid out.

The Labor Department released a report this morning showing an uptick in jobless claims in the week ended September 17th.

The report showed initial jobless claims inched up to 213,000, an increase of 5,000 from the previous week's revised level of 208,000.

Economists had expected jobless claims to edge up to 218,000 from the 213,000 originally reported for the previous week.

The modest increase came after jobless claims dropped to their lowest level since the week ended May 28th in the previous week.

Meanwhile, the Conference Board released a separate report showing its index of leading U.S. economic indicators declined for the sixth consecutive month in August.

The Conference Board said its leading economic index fell by 0.3 percent in August after sliding by a revised 0.5 percent in July.

Economists had expected the leading economic index to come in unchanged compared to the 0.4 percent drop originally reported for the previous month.

A strong gain Merck (MRK) helped limit the downside for the Dow, with the drug giant surging by 3.5 percent after a U.S. District Court ruled in the company's favor in a patent infringement suit against Viatris related to sitagliptin, an active ingredient in Januvia.

Fellow Dow component Salesforce (CRM) also posted a strong gain after the business software giant unveiled a plan to operate more efficiently and increase profit margins.

Sector News

Airline stocks extended the nosedive seen over the two previous sessions, with the NYSE Arca Airline Index plummeting by 2.8 percent to its lowest closing level in over two months.

Substantial weakness was also visible among semiconductor stocks, as reflected by the 2.8 percent plunge by the Philadelphia Semiconductor Index. The index ended the session at its lowest closing level in well over a year.

Banking stocks also saw significant weakness on the day, dragging the KBW Bank Index down by 2.5 percent to a two-month closing low.

Networking, computer hardware, and housing stocks also saw weakness, while pharmaceutical stocks bucked the downtrend.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved mostly lower during trading on Thursday. Japan's Nikkei 225 Index fell by 0.6 percent, while China's Shanghai Composite Index dipped by 0.3 percent.

The major European markets also moved to the downside on the day. While the U.K.'s FTSE 100 Index slumped by 1.1 percent, the German DAX Index and the French CAC 40 Index tumbled by 1.8 percent and 1.9 percent, respectively.

In the bond market, treasuries pulled back sharply following yesterday's late-session advance. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, spiked by 19.8 basis points to a new eleven-year closing high of 3.708 percent.

Looking Ahead

A lack of major U.S. economic data may lead to light trading activity on Friday, although traders are likely to keep an eye on Fed Chair Jerome Powell's opening remarks at a Fed Listens event.

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