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Stocks Climb Off Worst Levels But Close Mostly Lower - U.S. Commentary

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After failing to sustain an early move to the upside, stocks moved mostly lower over the course of the trading session on Thursday. The downturn on the day extended the pullback seen late in the previous session.

The major averages climbed off their worst levels of the day but remained stuck in negative territory. The Dow slid 122.35 points or 0.5 percent to 26,307.79, the Nasdaq dipped 12.87 points or 0.2 percent to 8,036.77 and the S&P 500 fell 6.21 points or 0.2 percent to 2,917.52.

The pullback on Wall Street was attributed to continued disappointment with yesterday's remarks by Federal Reserve Chairman Jerome Powell suggesting the central bank is not likely to lower interest rates in the near future as some had hoped.

In his post-monetary policy meeting press conference, Powell said the Fed sees "transitory factors" contributing to recent low inflation readings.

Powell said the Fed would take persistently low inflation into account when setting policy but currently expects inflation to return to the 2 percent objective.

Traders also moved out of risky assets such as stocks ahead of the Labor Department's closely watched monthly jobs report on Friday.

Employment is expected to increase by 185,000 jobs in April following the addition of 196,000 jobs in March, while the unemployment rate is expected to hold at 3.8 percent.

Meanwhile, traders largely shrugged off the release of a batch of largely upbeat U.S. economic data, including a Labor Department report showing a spike in productivity.

The Labor Department said productivity surged up by 3.6 percent in the first quarter after climbing by a downwardly revised 1.3 percent in the fourth quarter.

Economists had expected production to jump by 2.2 percent compared to the 1.9 percent increase that had been reported for the previous quarter.

Meanwhile, the report also said unit labor costs dropped by 0.9 percent in the first quarter after soaring by 2.5 percent in the fourth quarter.

The pullback in unit labor costs came as a surprise to economists, who had expected costs to climb by 1.5 percent during the quarter.

"The good news is the economy is entirely capable of producing the kind of productivity necessary to keep inflation in check if growth accelerates. Hence, we can have faster growth, and real wage increases, too," said FTN Financial Chief Economist Chris Low.

He added, "The bad news, as featured prominently in yesterday's post-FOMC press conference, the Fed will continue to fight to prevent either from becoming a sustained reality, for our own good, of course."

A separate report from the Commerce Department showed new orders for manufactured goods jumped by more than expected in March amid a substantial rebound in orders for transportation equipment.

The Commerce Department said factory orders spiked by 1.9 percent in March after falling by a revised 0.3 percent in February. Economists had expected orders to surge up by 1.5 percent.

Sector News

Tobacco stocks showed a substantial move to the downside on the day, dragging the NYSE Arca Tobacco Index down by 2.5 percent.

Significant weakness was also visible among energy stocks, which moved sharply lower along with the price of crude oil. Crude for June delivery plunged $1.79 to $61.81 a barrel despite U.S. efforts to cut off Iranian oil exports.

Gold stocks also saw considerable weakness amid a steep drop by the price of the precious metal, while notable strength emerged among transportation, semiconductor, and biotechnology stocks.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region turned in a mixed performance on Thursday, with markets in Japan and mainland China closed for holidays. Hong Kong's Hang Seng Index advanced by 0.8 percent, while Australia's S&P/ASX 200 Index fell by 0.6 percent.

Meanwhile, European stocks moved mostly lower on the day. While the German DAX Index closed just above the unchanged line, the U.K.'s FTSE 100 Index dropped by 0.5 percent and the French CAC 40 Index slumped by 0.9 percent.

In the bond market, treasuries extended the pullback seen late in the previous session. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, climbed 4.1 basis points to 2.552 percent.

Looking Ahead

The monthly jobs report is likely to be in the spotlight on Friday, overshadowing a separate report on service sector activity.

In earnings news, Activision Blizzard (ATVI), CBS Corp. (CBS), Gilead Sciences (GILD), and U.S. Steel (X) are among the companies releasing their quarterly results after the close of today's trading.

DISH Network (DISH) and Newell Brands (NWL) are also among the companies due to report their results before the start of trading on Friday.

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