After moving sharply lower at the start of trading on Thursday, stocks showed a substantial recovery attempt over the course of the trading day. The rebound came as upbeat housing data helped offset worries about the Federal Reserve.
The major averages climbed well off their worst levels of the day but still ended the session in the red. The Dow edged down 12.67 points or 0.1 percent to 15,294.50, the Nasdaq slipped 3.88 points or 0.1 percent to 3,459.42 and the S&P 500 dipped 4.84 points or 0.3 percent to 1,650.51.
The sell-off seen at the start of trading reflected lingering concerns about the Federal Reserve scaling back its asset purchase program as well as disappointing Chinese manufacturing data.
In Congressional testimony on Wednesday, Fed Chairman Ben Bernanke acknowledged that upbeat economic data could lead the central bank to taper its asset purchase program in the next few meetings.
Adding to the worries, the minutes of the latest Fed meeting said a number of participants expressed willingness to adjust the flow of purchases downward as early as the June meeting.
Meanwhile, a report released by Markit Economics and HSBC showed that Chinese manufacturing activity unexpectedly contracted in May.
The report showed that the purchasing managers index fell to 49.6 in May from 50.4 in April, with a reading below 50 indicating a contraction. Economists had expected the index to remain unchanged.
Nonetheless, stocks did not see much follow-through on the initial downward move, as traders still seemed reluctant to sell stocks.
The subsequent recovery by the markets was partly due to the release of a report from the Commerce Department showing that new home sales came in well above economist estimates in the month of April.
The Commerce Department said new home sales climbed 2.3 percent to a seasonally adjusted annual rate of 454,000 in April from the revised March rate of 444,000.
Economists had expected new home sales to rise to an annual rate of 425,000 compared to the 417,000 originally reported for the previous month, reflecting a 1.9 percent increase.
Before the start of trading, the Labor Department released a separate report showing a bigger than expected drop in weekly jobless claims in the week ended May 18th.
Sector News
While most of the major sectors climbed well off their worst levels, significant weakness remained visible among commercial real estate stocks. The Morgan Stanley REIT Index fell by 1.7 percent, pulling back further off Tuesday's five-year high.
Universal Health Realty Income Trust (UHT) and Sun Communities (SUI) turned in two of the real estate sector's worst performances.
Steel stocks also saw continued weakness, with the NYSE Arca Steel Index ending the day down by 1.2 percent. The weakness in the sector came as the disappointing Chinese manufacturing data raised concerns about the outlook for global steel demand.
Brokerage, telecom, and railroad stocks also ended the day mostly in the red, although well off their lows for the session.
Meanwhile, computer hardware stocks showed a strong move to the upside on the day, driving the NYSE Arca Computer Hardware Index up by 2.4 percent. With the gain, the index reached its best closing level in a year.
Hewlett-Packard (HPQ) helped to lead the hardware sector higher, with the PC giant jumping by 17.1 percent after reporting better than expected second quarter earnings and raising its full-year guidance.
Airline, housing, and healthcare provider stocks also moved higher over the course of the session, contributing to the recovery attempt by the broader markets.
Other Markets
In overseas trading, stock markets across the Asia-Pacific region moved sharply lower during trading on Thursday. Japan's Nikkei 225 Index plummeted by 7.3 percent, while Hong Kong's Hang Seng Index tumbled by 2.5 percent.
The major European markets also showed notable moves to the downside on the day. The U.K.'s FTSE 100 Index, the French CAC 40 Index and the German DAX Index all dropped by 2.1 percent.
In the bond market, treasuries showed a lack of direction for much of the session before closing roughly flat. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, ended the day down by less than a basis point at 2.023 percent.
Looking Ahead
While trading activity on Friday may be somewhat subdued ahead of the long weekend, traders are likely to keep an eye on the Commerce Department's report on durable goods orders in the month of April.
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