U.S. Stocks Pull Back Sharply After Seeing Early Strength
After failing to sustain an early move to upside, stocks moved sharply lower over the course of the trading session on Thursday. The major averages renewed the sell-off seen on Tuesday, with the Dow tumbling to its lowest closing level in four months.
The major averages climbed off their worst levels going into the close but still posted steep losses. The Dow slumped 543.54 points or 1.7 percent to 32,254.86, the Nasdaq plummeted 237.65 points or 2.1 percent to 11,338.35 and the S&P 500 plunged 73.69 points or 1.9 percent at 3,918.32.
The early strength on Wall Street came following the release of a report from the Labor Department showing initial jobless claims rose by more than expected in the week ended March 4th.
The report said initial jobless claims climbed to 211,000, an increase of 21,000 from the previous week’s unrevised level of 190,000. Economists had expected jobless claims to inch up to 195,000.
With the bigger than expected increase, jobless claims reached their highest level since hitting 223,000 in the week ended December 24th.
The data helped ease concerns about labor market tightness, which the Federal Reserve has pointed to as a reason for stubbornly elevated inflation.
Buying interest waned shortly after the start of trading, however, as traders look ahead to the release of the Labor Department’s more closely watched monthly jobs report on Friday.
Economists currently expect employment to jump by 203,000 jobs in February after surging by 517,000 jobs in January, while the unemployment rate is expected to hold at 3.4 percent.
“Fed Chair Powell seems to have signaled they will accelerate the tightening pace to a half-point rate rise if we get both a hot NFP and inflation reports,” said Edward Moya, senior market analyst at OANDA.
He added, “Some traders are thinking that if tomorrow delivers a not-so-hot jobs report, that we could see Fed fund futures lean towards a quarter-point rate rise for the March 22nd FOMC meeting.”
Banking stocks moved sharply lower over the course of the session, dragging the KBW Bank Index down by 7.7 percent to its lowest closing level in almost five months.
Substantial weakness also emerged among oil service stocks, as reflected by the 4.2 percent nosedive by the Philadelphia Oil Service Index.
The sell-off by oil service stocks came amid a notably decrease by the price of crude oil, with crude for April delivery slumping $0.94 to $75.72 a barrel.
Brokerage stocks also showed a significant move to the downside on the day, resulting in a 4.1 percent plunge by the NYSE Arca Broker/Dealer Index. The index ended the session at its lowest closing level in well over a month.
Steel, chemical and commercial real estate stocks also came under pressure as the day progressed, moving lower along with most of the other major sectors.
In overseas trading, stock markets across the Asia-Pacific region turned in a mixed performance during trading on Thursday. Japan’s Nikkei 225 Index climbed by 0.6 percent, while China’s Shanghai Composite Index dipped by 0.2 percent.
Meanwhile, European stocks moved mostly lower during trading on Thursday. While the German DAX Index closed nearly unchanged, the French CAC 40 Index edged down by 0.1 and the U.K.’s FTSE 100 Index slid by 0.6 percent.
In the bond market, treasuries have moved to the upside after showing a lack of direction earlier in the session. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, is down by 4.7 basis points at 3.929 percent.
Trading on Friday is likely to be driven by reaction to the monthly jobs report, which could significantly impact the outlook for interest rates.
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