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Major Averages Turn Mixed After Seeing Initial Weakness - U.S. Commentary


After coming under pressure early in the session, stocks have regained ground over the course of morning trading on Thursday. The major averages have climbed well off their worst levels of the day, with the tech-heavy Nasdaq bouncing into positive territory.

Currently, the major averages are turning in a mixed performance. The Nasdaq is up 3.40 points or 0.1 percent at 7,423.78, while the Dow is down 89.70 points or 0.4 percent at 25,453.57 and the S&P 500 is down 6.63 points or 0.2 percent at 2,746.40.

The early weakness on Wall Street came following the release of a Commerce Department report unexpectedly showing a substantial decrease in retail sales in the month of December.

The Commerce Department said retail sales tumbled by 1.2 percent in December after inching up by a revised 0.1 percent in November.

Economists had expected retail sales to rise by 0.2 percent, matching the uptick originally reported for the previous month.

Excluding a jump in auto sales, retail sales plunged by an even steeper 1.8 percent in December after coming in unchanged in November. Ex-auto sales had been expected to edge up by 0.1 percent.

Sales by gas stations helped lead the way lower amid a drop in gasoline prices, plummeting by 5.1 percent in December following a 4.4 percent nosedive in November.

Underlying sales figures were also troubling, however, as closely watched core retail sales, which exclude autos, gasoline, building materials and food services, tumbled by 1.7 percent in December after an upwardly revised 1.0 percent jump in November.

"It's possible the monthly swings are due to seasonal adjustment problems, but there is no hiding that there was a definite tailing off of momentum at the end of 2018," said Michael Pearce, Senior U.S. Economist at Capital Economics.

Adding to the negative sentiment, a report from the Labor Department showed first-time claims for U.S. unemployment benefits unexpectedly increased in the week ended February 9th.

The report said initial jobless claims rose to 239,000, an increase of 4,000 from the previous week's revised level of 235,000. Economists had expected jobless claims to drop to 225,000.

Meanwhile, a separate Labor Department report showed producer prices in the U.S. unexpectedly edged lower in the month of January.

The Labor Department said its producer price index for final demand slipped by 0.1 percent for the second straight month in January. Economists had expected the index to inch up by 0.1 percent.

Excluding steep drops in food and energy prices, core producer prices increased by 0.3 percent in January after coming in unchanged in December. Core producer prices were expected to rise by 0.2 percent.

Selling pressure has waned over the course of the morning, as traders continue to express optimism about U.S.-China trade talks and avoiding another government shutdown.

Most of the major sectors are showing only modest moves on the day, although considerable weakness is visible among financial stocks.

Reflecting the weakness in the financial sector, the KBW Bank Index and the NYSE Arca Broker/Dealer Index are down by 1.5 percent and 1 percent, respectively.

On the other hand, Cisco Systems (CSCO) is leading the networking sector higher after reporting better than expected fiscal second quarter results and increasing its dividend and stock repurchase.

In overseas trading, most stock markets across the Asia-Pacific region turned in a lackluster performance during trading on Thursday. Japan's Nikkei 225 Index ended the day just below the unchanged line, while Hong Kong's Hang Seng Index dipped by 0.2 percent.

Meanwhile, the major European markets have turned mixed on the day. While the German DAX Index has fallen by 0.5 percent, the French CAC 40 Index is up by 0.2 percent and the U.K.'s FTSE 100 Index is up by 0.4 percent.

In the bond market, treasuries have rebounded strongly after trending lower over the past few sessions. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, is down by 4.9 basis points at 2.659 percent.

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