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Stocks Continue To See Notable Weakness In Mid-Day Trading - U.S. Commentary

wallstreet2 103112 23Jan14

After coming under pressure early in the session, stocks are seeing continued weakness in mid-day trading on Thursday. Disappointing Chinese manufacturing data is weighing on the markets following the lackluster performance seen in recent sessions.

The major averages have moved roughly sideways in recent trading, stuck firmly in negative territory. The Dow is down 176.60 points or 1.1 percent at 16,196.74, the Nasdaq is down 36.25 points or 0.9 percent at 4,206.75, and the S&P 500 is down 17.34 points or 0.9 percent at 1,827.52.

The weakness on Wall Street is partly due to concerns about the outlook for the global economy following the release of a report showing a contraction in Chinese manufacturing activity.

Results of a preliminary survey by Markit and HSBC showed that their index of Chinese manufacturing activity fell to 49.6 in January from 50.5 in December, with a reading below 50 indicating a contraction. Economists had expected a more modest drop to 50.3.

A report released by the National Association of Realtors showing U.S. existing home sales below estimates in December also generated some negative sentiment.

NAR said existing home sales climbed 1.0 percent to an annual rate of 4.87 million in December after tumbling 5.9 percent to a downwardly revised 4.82 million in November. Economists had expected existing home sales at a rate of 4.93 million.

Meanwhile, the Labor Department released a report before the start of trading showing that initial jobless claims increased by less than expected in the week ended January 18th.

The report said initial jobless claims edged up to 326,000, an increase of 1,000 from the previous week's revised figure of 325,000. Economists had expected claims to climb to 330,000 from the 326,000 originally reported for the previous week.

Among individual stocks, shares of American Eagle (AEO) have moved sharply lower after the apparel retailer said its CEO Robert Hanson is leaving the company after just two years on the job. Executive Chairman Jay Schottenstein was appointed interim CEO.

Nokia (NOK) has also come under pressure after reporting a 22 percent decrease in sales at its network equipment division in the fourth quarter. The company previously agreed to sell its mobile phones business to Microsoft (MSFT).

On the other hand, shares of Netflix (NFLX) are moving sharply higher after the Internet video service provider reported better than expected fourth quarter earnings amid strong subscriber growth.

Sector News

Airline stocks have shown a substantial move to the downside on the day, dragging the NYSE Arca Airline Index down by 2.4 percent. The steep loss by the index comes after it ended the previous session at its best closing level in over eleven years.

Southwest Airlines (LUV) is turning in one of the airline sector's worst performances despite reporting better than expected fourth quarter results

Considerable weakness is also visible among oil service stocks, as reflected by the 1.6 percent loss being posted by the Philadelphia Oil Service Index. Tidewater (TDW), Diamond Offshore (DO) and Oceaneering International (OII) are posting notable losses.

Banking stocks also seeing significant weakness in mid-day trading, with the Dow Jones Banks Index down by 1.7 percent. Trucking, chemical, and brokerage stocks have also come under pressure.

Meanwhile, gold and railroad stocks are bucking the downtrend by the broader markets, driving the NYSE Arca Gold Bugs Index and the Dow Jones Railroads Index up by 3 percent and 1.8 percent, respectively.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved mostly lower during trading on Thursday. Japan's Nikkei 225 Index slumped by 0.8 percent, while Hong Kong's Hang Seng Index tumbled by 1.5 percent.

The major European markets also came under pressure on the day. While the French CAC 40 Index dropped by 1 percent, the German DAX Index and the U.K.'s FTSE 100 Index slid by 0.9 percent and 0.8 percent, respectively.

In the bond market, treasuries have moved notably higher after ending the previous session in the red. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, is down by 6.1 basis points at 2.799 percent.

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