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Worries About Trade, Global Economy Weigh On Wall Street - U.S. Commentary


Stocks moved notably lower over the course of the trading session on Thursday, adding to the modest losses posted in the previous session. With the drop, the major averages pulled back further off the two-month closing highs set on Tuesday.

The major averages climbed well off their worst levels of the day but still closed firmly negative. The Dow slumped 220.77 points or 0.9 percent to 25,169.53, the Nasdaq plunged 86.93 points or 1.2 percent to 7,288.35 and the S&P 500 tumbled 25.56 points or 0.9 percent to 2,706.05.

Renewed concerns about a U.S.-China trade deal generated selling pressure after a report from CNBC said President Donald Trump and Chinese President Xi Jinping are "highly unlikely" to meet before a March 2nd deadline,

A senior administration official told CNBC that Trump and Xi may still meet "shortly" after the deadline, when tariffs on Chinese goods are currently set to jump automatically.

The report from CNBC comes after White House economic adviser Larry Kudlow told Fox Business the U.S. and China have a "pretty sizable distance to go" before reaching a trade deal.

Worries about the U.S.-China trade talks added to concerns about the global economy raised by the European Commission lowering its eurozone growth forecast.

The European Commission slashed its GDP growth forecast for 2019 to 1.3 percent from 1.9 percent and lowered its estimate for growth in 2020 to 1.6 percent from 1.7 percent.

The downgrade reflected external factors, such as trade tensions and the slowdown in emerging markets, notably in China.

Officials warned that the European outlook faces substantial risks due to the uncertainty about Brexit and the slowdown in China.

A steep drop by shares of Twitter (TWTR) also weighed on the markets after the social media giant reported better than expected fourth quarter results but forecast a jump in expenses this year.

On the U.S. economic front, a report from the Labor Department showed first-time claims for U.S. unemployment benefits pulled back less than expected in the week ended February 2nd after the jump seen in the previous week.

The report said initial jobless claims fell to 234,000, a decrease of 19,000 from the previous week's unrevised level of 253,000. Economists had expected jobless claims to drop to 221,000.

Sector News

Energy stocks moved sharply lower over the course of the trading session amid a steep drop by the price of crude oil. Crude for March delivery climbed well off its worst levels but still tumbled $1.37 to $52.64 a barrel amid concerns about global demand.

Reflecting the weakness in the energy sector, the Philadelphia Oil Service Index nosedived by 4.6 percent, the NYSE Arca Natural Gas Index plunged by 3.4 percent and the NYSE Arca Oil Index slumped by 2.4 percent.

Considerable weakness also emerged among semiconductor stocks, as reflected by the 2.2 percent drop by the Philadelphia Semiconductor Index. The index pulled back after ending the previous session at its best closing level in four months.

Biotechnology, computer hardware, and chemical stocks also moved significantly lower on the day, while utilities stocks bucked the downtrend.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region turned in a mixed performance on Thursday, with markets in Hong Kong and mainland China still closed for holidays. Japan's Nikkei 225 Index fell by 0.6 percent, while Australia's S&P/ASX 200 Index jumped by 1.1 percent.

Meanwhile, the major European markets all moved notably lower over the course of the session. While the German DAX Index plunged by 2.7 percent, the French CAC 40 Index tumbled by 1.8 percent and the U.K.'s FTSE 100 Index slumped by 1.1 percent.

In the bond market, treasuries moved to the upside after ending the previous session roughly flat. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, fell by 5 basis points to 2.652 percent.

Looking Ahead

Trading on Friday may be somewhat subdued, as traders look ahead to U.S.-China trade talks in Beijing next week amid a quiet day on the U.S. economic front.

On the earnings front, Expedia (EXPE), Mattel (MAT), News Corp. (NWSA), and Western Union (WU) are among the companies releasing their quarterly results after the close of today's trading.

Coty (COTY), Exelon (EXC), Goodyear Tire (GT), and Hasbro (HAS) are also among the companies due to report their results before the start of trading on Friday.

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