Dow Pulls Back Sharply But Nasdaq, S&P 500 Lack Direction

wallstreet3 061318 01dec22 lt

Following the significant rally seen in the previous session, stocks have shown a lack of direction over the course of morning trading on Thursday.

While the Dow has shown a notable move to the downside, the Nasdaq and the S&P 500 have been bouncing back and forth across the unchanged line.

Currently, the major averages are turning in a mixed performance on the day. The Nasdaq is up 13.61 points or 0.1 percent at 11,481.61, but the S&P 500 is down 3.26 points or 0.1 percent at 4,076.85 and the Dow is down 305.74 points or 0.9 percent at 34,284.03.

The sharp pullback by the Dow comes after the blue chip index ended Wednesday's trading at its best closing level in over seven months.

A steep drop by Salesforce (CRM) is weighing on the Dow, with the business software company plunging by 9.5 percent after announcing Bret Taylor will step down as Vice Chair and Co-CEO, effective January 31, 2023.

The lack of direction being shown by the broader markets comes as traders look ahead to the Labor Department's closely watched monthly jobs report on Friday.

Economists currently expect employment to jump by 200,000 jobs in November after shooting up by 261,000 jobs in October, while the unemployment rate is expected to hold at 3.7 percent.

The data could affect the outlook for interest rates, although the impact may be somewhat muted following Federal Reserve Chair Jerome Powell's remarks on Wednesday hinting at a slowdown in the pace of rate hikes as soon as next month.

Traders are also digesting another slew of U.S. economic data, including a report from the Institute for Supply Management showing manufacturing activity contracted for the first time in over two years in the month of November.

The ISM said its manufacturing PMI slipped to 49.0 in November from 50.2 in October, with a reading below 50 indicating a contraction. Economists had expected the index to edge down to 49.8.

With the slightly bigger than expected decrease, the manufacturing PMI fell to its lowest level since hitting 43.5 in May of 2020.

Meanwhile, a separate report released by the Labor Department showed first-time claims for U.S. unemployment benefits pulled back by more than expected in the week ended November 26th.

The report said initial jobless claims fell to 225,000, a decrease of 16,000 from the previous week's revised level of 241,000.

Economists had expected jobless claims to edge down to 235,000 from the 240,000 originally reported for the previous week.

The Commerce Department also released a report showing personal income climbed by 0.7 percent in October after rising by 0.4 percent in September. Economists had expected another 0.4 percent increase.

The report said personal spending also advanced by 0.8 percent in October after climbing by 0.6 percent in September. The increase matched economist estimates.

A reading on inflation said to be preferred by the Fed showed core consumer prices, which exclude food and energy prices, edged up by 0.2 percent in October after climbing by 0.5 percent in September. Economists had expected prices to rise by 0.3 percent.

The annual rate of core consumer price growth also slowed to 5.0 percent in October from 5.2 percent in September, coming in line with estimates.

While most of the major sectors are showing only modest moves on the day, gold stocks have moved sharply higher, driving the NYSE Arca Gold Bugs Index up by 2.9 percent to a five-month intraday high.

The rally by gold stocks comes amid a substantial increase by the price of the precious metal, with gold for February delivery soaring $50.40 to $1,810.30 an ounce.

Significant strength is also visible among housing stocks, as reflected by the 1.4 percent gain being posted by the Philadelphia Housing Sector Index. The index has reached its best intraday level in well over three months.

On the other hand, banking stocks have shown a notable move to the downside, dragging the KBW Bank Index down by 1.4 percent.

In overseas trading, stock markets across the Asia-Pacific region moved mostly higher during trading on Thursday. Japan's Nikkei 225 Index advanced by 0.9 percent, while China's Shanghai Composite Index rose by 0.5 percent.

Meanwhile, the major European markets have turned mixed on the day. While the U.K.'s FTSE 100 Index is down by 0.2 percent, the French CAC 40 Index is up by 0.1 percent and the German DAX Index is up by 0.4 percent.

In the bond market, treasuries have moved sharply higher, extending the rally seen late in the previous session. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, is down by 11.1 basis points at 3.592 percent.

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