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Stocks Move Notably Lower On Global Economic Concerns - U.S. Commentary

wallstreet july16 07mar19 lt

Extending the downward move seen in the previous session, stocks saw considerable weakness during trading on Thursday. With the drop on the day, the Nasdaq and the S&P 500 pulled back further off the more than four-month intraday highs set on Monday.

The major averages finished the session firmly in negative territory. The Dow slid 200.23 points or 0.8 percent to 25,473.23, the Nasdaq tumbled 84.46 points or 1.1 percent to 7,421.46 and the S&P 500 fell 22.52 points or 0.8 percent to 2,748.93.

The continued weakness on Wall Street came after the European Central Bank slashed its economic growth forecast, citing lingering, mainly external uncertainties.

The ECB also said it now expects eurozone interest rates to remain at the current level at least till the end of this year.

The eurozone growth outlook for this year was cut to 1.1 percent from 1.7 percent, while the outlook for next year was trimmed to 1.6 percent from 1.7 percent.

The risks surrounding the euro area growth outlook are still tilted to the downside, on account of the persistence of uncertainties related to geopolitical factors, the threat of protectionism and vulnerabilities in emerging markets, the ECB said.

"While there are signs that some of the idiosyncratic domestic factors dampening growth are starting to fade, the weakening in economic data points to a sizeable moderation in the pace of the economic expansion that will extend into the current year," said ECB President Mario Draghi.

He added, "The persistence of uncertainties related to geopolitical factors, the threat of protectionism and vulnerabilities in emerging markets appears to be leaving marks on economic sentiment."

Reflecting the concerns about the economic outlook, the ECB announced steps to preserve favorable bank lending conditions and the smooth transmission of monetary policy.

The ECB said a new series of quarterly targeted longer-term refinancing operations (TLTRO-III) will be launched, starting in September 2019 and ending in March 2021, each with a maturity of two years.

Sector News

Steel stocks showed a substantial move to the downside amid concerns about global demand. Reflecting the weakness in the sector, the NYSE Arca Steel Index slumped by 1.9 percent.

Considerable weakness was also visible among financial stocks, with the NYSE Arca Broker/Dealer Index and the KBW Bank Index falling by 1.8 percent and 1.4 percent, respectively.

Oil service stocks also saw significant weakness on the day, dragging the Philadelphia Oil Service Index down by 1.6 percent.

The weakness among oil service stocks came despite an increase by the price of crude oil, as crude for April delivery rose $0.44 to $56.66 a barrel.

Retail, computer hardware and networking stocks also saw notable weakness, while gold stocks bucked the downtrend even though the price of the precious metal closed modestly lower.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region turned in another mixed performance on Thursday. Japan's Nikkei 225 Index dropped by 0.7 percent, while China's Shanghai Composite Index inched up by 0.1 percent.

Meanwhile, the major European markets all moved to the downside on the day. While the German DAX Index slid by 0.6 percent, the U.K.'s FTSE 100 Index and the French CAC 40 Index fell by 0.5 percent and 0.4 percent, respectively.

In the bond market, treasuries moved notably higher amid the weakness on Wall Street. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, fell 5.6 basis points to 2.636 percent.

Looking Ahead

Trading on Friday is likely to be driven by reaction to the Labor Department's closely watched monthly jobs report for February.

Employment is expected to rise by 180,000 jobs in February after jumping by 304,000 jobs in January, while the unemployment rate is expected to dip to 3.9 percent from 4.0 percent.

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