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Stocks Remain Firmly Negative After Early Pullback - U.S. Commentary


After moving sharply lower early in the session, stocks continue to see considerable weakness in mid-day trading on Thursday. Despite the steep drop on the day, the major averages are only partly offsetting the substantial gains posted in the previous session.

The major averages currently remain firmly in negative territory. The Dow is down 317.21 points or 1.4 percent at 22,561.24, the Nasdaq is down 124.69 points or 1.9 percent at 6,426.67 and the S&P 500 is down 35.70 points or 1.5 percent at 2,432.00.

The pullback on Wall Street comes as traders look to cash in on the rebound seen on Wednesday, when the Dow recorded its biggest single-day point gain in history.

The upward move may have been exaggerated by light volume in post-holiday trading, inspiring traders to quickly pull out of their positions.

Lingering concerns about the global economic outlook and the ongoing government shutdown are also weighing on the markets.

While the Senate is expected to reconvene later today after adjourning for Christmas, the government shutdown seems likely to continue as President Donald Trump and Democratic lawmakers remain at an impasse over border wall funding.

Negative sentiment may also have been generated by a report from the Conference Board showing a significant deterioration in consumer confidence in the month of December.

The Conference Board said its consumer confidence index slumped to 128.1 in December after dipping to a revised 136.4 in November.

Economists had expected the consumer confidence index to edge down to 134.0 from the 135.7 originally reported for the previous month.

The bigger than expected decrease by the headline index reflected a continued deterioration in consumer expectations, with the expectations index plunging to 99.1 in December after falling to 112.3 in November.

"While consumers are ending 2018 on a strong note, back-to-back declines in Expectations are reflective of an increasing concern that the pace of economic growth will begin moderating in the first half of 2019," said Lynn Franco, Senior Director of Economic Indicators at the Conference Board.

Meanwhile, a separate report from the Labor Department showed a slight drop in first-time claims for U.S. unemployment benefits in the week ended December 22nd.

The report said initial jobless claims slipped to 216,000, a decrease of 1,000 from the previous week's revised level of 217,000.

Economists had expected jobless claims to inch up to 217,000 from the 214,000 originally reported for the previous week.

Sector News

Oil service stocks are pulling back sharply after seeing substantial strength in the previous session, with the Philadelphia Oil Service Index plunging by 3 percent.

The pullback by oil service comes as the price of crude oil for February delivery is tumbling $1.11 to $45.11 a barrel following the spike seen on Wednesday.

Substantial weakness is also visible among steel stocks, as reflected by the 2.3 percent slump by the NYSE Arca Steel Index. Lingering trade concerns are likely weighing on the sector.

Retail, biotechnology, telecom and software stocks are also seeing considerable weakness amid a broad-based pullback on Wall Street.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved mostly higher on Thursday, although Chinese stocks bucked the uptrend. Japan's Nikkei 225 Index skyrocketed by 3.9 percent, but China's Shanghai Composite Index fell by 0.6 percent.

Meanwhile, the major European markets moved the downside on the day. While the German DAX Index plunged by 2.4 percent, the U.K.'s FTSE 100 Index tumbled by 1.5 percent and the French CAC 40 Index dropped by 0.6 percent.

In the bond market, treasuries are rebounding following the notable pullback seen in the previous session. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, is down by 3.9 basis points at 2.758 percent.

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