Stocks are showing a lack of direction in early trading on Thursday as traders digest a mixed batch of economic data. The major averages have turned mixed after ending the previous session at their worst closing levels in over two months.
Currently, the major averages are on opposite sides of the unchanged line, with the tech-heavy Nasdaq posting a modest loss. While the Nasdaq is down 2.70 points or 0.1 percent at 2,672.68, the Dow is up 25.65 points or 0.2 percent at 12,074.59 and the S&P 500 is up 2.06 points or 0.2 percent at 1,281.62.
The choppy trading comes as traders react to a Labor Department report showing an unexpected uptick in weekly jobless claims as well as a Commerce Department report showing that the U.S. trade deficit unexpectedly narrowed in the month of April.
The Labor Department report showed that initial jobless claims edged up by 1,000 to 427,000 from the previous week's revised figure of 426,000. The modest increase surprised economists, who had been expecting jobless claims to slip to 418,000 from the 422,000 originally reported for the previous week.
Peter Boockvar, equity strategist at Miller Tabak, said, "Claims are now stubbornly above 400,000 for a 9th straight week and points to a still very lackluster labor market that was on full display when the May payroll figures were released last week."
Separately, the Commerce Department said that the U.S. trade deficit narrowed to $43.7 billion in April from a revised $46.8 billion in March. Economists had expected the trade deficit to widen to $49.0 billion from the $48.2 billion originally reported for the previous month.
The unexpectedly narrower deficit was largely due to a sharp drop in imports from Japan due to supply disruptions caused by the recent earthquake.
While the narrower trade deficit for April may lead economists to raise their estimates for second quarter GDP growth, Paul Dales, Senior U.S. Economist at Capital Economics, said the drop in the deficit will eventually be reversed as the temporary effects caused by disruptions from Japan's earthquake fade.
Most of the major sectors are showing only modest moves early on, contributing to the lackluster performance by the broader markets.
Nonetheless, early strength has emerged among health insurance stocks, with the Morgan Stanley Healthcare Payor Index up by 1 percent. On the other hand, biotechnology stocks have come under pressure, dragging the NYSE Arca Biotechnology Index down by 1.2 percent.
In overseas trading, stocks markets in the Asia-Pacific region closed mostly lower on Thursday, although Japan's Nikkei 225 Index bucked the downtrend once again, edging up by 0.2 percent. Hong Kong's Hang Seng dipped by 0.2 percent, while China's Shanghai Composite Index plunged by 1.7 percent.
Meanwhile, the major European markets have all moved to the upside on the day. The U.K.'s FTSE 100 Index has edged up by 0.2 percent, while the French CAC 40 Index and the German DAX Index are up by 0.4 percent and 0.3 percent, respectively.
In the bond market, treasuries are seeing modest strength in morning trading, adding to the gains posted in the previous session. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, is down by 2.5 basis points at 2.939 percent.
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