Stocks Close Notably Lower Following Lifeless Economic Data - U.S. Commentary

(RTTNews) - Stocks moved considerably lower on Thursday, with some disappointing economic data prompting traders to cash in on the recent strength in the markets. The major averages all closed in negative territory, backing further off of the one-year highs set on Tuesday.

Before the start of trading, the Labor Department reported that first-time jobless claims in the week ended November 14th came in at 505,000, unchanged from the previous week's revised figure. Economists had been expecting jobless claims to edge up to 504,000 from the 502,000 originally reported for the previous week.

With jobless claims unchanged, they remained above the 500,000 level, pointing to continued weakness in the labor market. Jobless claims have not been below 500,000 since coming in at 488,000 in the week ended January 3rd.

Separately, the Conference Board reported a continued increase in its leading economic indicators index in the month of October, although the increase by the index was slightly smaller than economists had been anticipating.

The leading indicators index rose 0.3 percent in October following a 1.0 percent gain in September and a 0.4 percent increase in August. While the index rose for the seventh consecutive month, economists had been expecting a 0.4 percent increase.

Meanwhile, the Federal Reserve Bank of Philadelphia provided one of the few bright spots on the day, releasing a report showing that activity in the mid-Atlantic region's manufacturing sector picked up in November by much more than economists had expected.

The Philly Fed said its index of regional activity in the manufacturing sector rose to 16.7 in November from 11.5 in October, with a positive reading indicating growth in the sector. Economists had been expecting a much more modest increase by the index to 12.2.

In other news, Treasury Secretary Timothy Geithner said that the U.S. has a long way to go to ensure a full economic recovery and guarantee that last year's financial collapse will not happen again in the future.

Speaking before the congressional Joint Economic Committee on Capitol Hill earlier today, Geithner said that the regulatory regime that is currently in place is the same regime that failed to prevent the financial crisis, filled with too many agencies and too many regulatory gaps.

The major averages ended the session firmly in negative territory, although well off their worst levels of the day. The Dow fell by 93.87 points or 0.9 percent to 10,332.44, the Nasdaq dropped by 36.32 points or 1.7 percent to 2,156.82 and the S&P 500 closed down by 14.90 points or 1.3 percent at 1,094.90.

Sector News

Oil service stocks were some of the day's hardest hit stocks, pushing the Philadelphia Oil Service Sector Index down by 3.5 percent. The weakness among oil service stocks came as the price of crude oil declined by $2.12 to $77.46 per barrel.

Semiconductor stocks also saw steep losses, with the Philadelphia Semiconductor Index falling by 3.4 percent after Bank of America-Merrill Lynch lowered its outlook for global growth in the semiconductor industry.

Significant weakness was also visible among banking stocks, as reflected by the 2 percent decline by the Kbw Bank Index. Synovus Financial (SNV | Quote | Chart | News | PowerRating) was one of the leading decliners in the sector, plunging by 12.2 percent to a multi-year closing low.

Commercial real estate, networking, electronic storage, airline and housing stocks also posted notable losses, reflecting the day's broad based weakness.

Dow Components

Intel (INTC | Quote | Chart | News | PowerRating) was the leading percentage decliner in the Dow, falling by 4.1 percent, although it was able to hold in a trading range. The loss came after Bank of America-Merrill Lynch downgraded the semiconductor giant to Neutral from Buy.

DuPont (DD | Quote | Chart | News | PowerRating) also moved considerably lower, posting a loss of 1.8 percent. With the retreat, the stock pulled back off of the eleven-month closing high it set yesterday.

Alcoa (AA | Quote | Chart | News | PowerRating), General Electric (GE | Quote | Chart | News | PowerRating), Chevron (CVX | Quote | Chart | News | PowerRating) and JP Morgan Chase (JPM | Quote | Chart | News | PowerRating) also gave back some of their recent gains.

On the other hand, Wal-Mart (WMT | Quote | Chart | News | PowerRating) gained 0.7 percent, bucking the downtrend in the Dow. With the gain, shares of the retailer ended the session at their best closing price in over ten months.

Other Markets

In overseas trading, stock markets the Asia-Pacific region turned in another mixed performance on Thursday. Japan's benchmark Nikkei 225 Index fell by 1.3 percent, while China's Shanghai Composite Index closed up 0.5 percent.

Meanwhile, the major European markets all moved notably lower on the day, with the U.K.'s FTSE 100 Index and the German DAX Index falling by 1.4 percent and 1.5 percent, respectively, while the French CAC 40 Index declined by 1.8 percent.

In the bond markets, treasuries were able to hold onto modest gains. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, closed at 3.349 percent, posting a loss of 1.7 basis points.

Looking Ahead

Friday, traders may have some time to delve deeper into the recent data and re-evaluate their market positions, with no first-tier economic data on tap for the session. Some of tomorrow's trading is likely to be driven by reaction to quarterly results from Dell Inc. (DELL | Quote | Chart | News | PowerRating), Gap (GPS | Quote | Chart | News | PowerRating), D.R. Horton (DHI | Quote | Chart | News | PowerRating) and J.M. Smucker (SJM | Quote | Chart | News | PowerRating).

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