Stocks Close Sharply Lower After Failed Recovery Attempt – U.S. Commentary

Stocks Close Sharply Lower After Failed Recovery Attempt – U.S. Commentary

After ending the previous session roughly flat, stocks moved sharply lower over the course of the trading day on Thursday. The major averages attempted a recovery after seeing early weakness but saw a significant pullback as the day progressed.

The major averages ended the day firmly in negative territory. The Dow tumbled 327.23 points or 1.3 percent to 25,379.54, the Nasdaq plunged 157.56 points or 2.1 percent to 7,485.14 and the S&P 500 slumped 40.43 points or 1.4 percent to 2,768.78.

The sell-off on Wall Street on Wall Street came after Treasury Secretary Steven Mnuchin announced he will not attend an upcoming investment conference in Saudi Arabia.

“Just met with @realDonaldTrump and @SecPompeo and we have decided, I will not be participating in the Future Investment Initiative summit in Saudi Arabia,” Mnuchin said in a post on Twitter.

Mnuchin joins several other top executives and international finance leaders that have dropped out of the conference, including JPMorgan Chase (JPM) CEO Jamie Dimon and International Monetary Fund Managing Director Christine Lagarde.

The announcement by Mnuchin comes as Saudi Arabia continues to face considerable international pressure over the recent disappearance and apparent murder of journalist Jamal Khashoggi.

Lingering concerns about the outlook for interest rates also weighed on the markets as traders continued to digest the minutes of the Federal Reserve’s latest monetary policy meeting.

The minutes released Wednesday afternoon showed the Fed continues to favor a “gradual approach” to raising interest rates, with the meeting participants generally judging that the economy was evolving about as anticipated.

The Fed’s forecasts point to one more rate hike before the end of this year, with CME Group’s FedWatch indicating a nearly 80 percent chance of a quarter-point rate increase in December.

On the U.S. economic front, the Labor Department released a report showing a modest decrease in first-time claims for U.S. unemployment benefits in the week ended October 13th.

The report said initial jobless claims slipped to 210,000, a decrease of 5,000 from the previous week’s revised level of 215,000. Economists had expected jobless claims to edge down to 212,000.

A separate report released by the Federal Reserve Bank of Philadelphia showed manufacturing activity in the Philadelphia area grew at a slightly slower rate in the month of October.

The Philly Fed said its diffusion index for current general activity edged down to 22.2 in October from 22.9 in September, although a positive reading still indicates growth in regional manufacturing activity. The index had been expected to drop to 20.0.

Meanwhile, the Conference Board released a report showing its index of leading U.S. economic indicators increased in line with economist estimates in September.

The Conference Board said its leading economic index climbed by 0.5 percent in September after rising by 0.4 percent in August.

Sector News

Oil service stocks showed a substantial move to the downside on the day, dragging the Philadelphia Oil Service Index down by 3.6 percent. With the drop, the index fell to its lowest closing level in over a month.

The weakness among oil service stocks came as the price of crude oil for November delivery tumbled $1.10 to $68.65 a barrel after plunging $2.17 to $69.75 a barrel on Wednesday.

Significant weakness was also visible among steel stocks, as reflected by the 2.8 percent slump by the NYSE Arca Steel Index. The weakness in the steel sector reflected concerns about the outlook for Chinese demand.

Transportation stocks also saw considerable weakness, resulting in a 2.6 percent drop by the Dow Jones Transportation Average.

Semiconductor, software, retail, and financial stocks also showed notables moves to the downside, reflecting broad based weakness on Wall Street.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved mostly lower during trading on Thursday. Japan’s Nikkei 225 Index slid by 0.8 percent, while China’s Shanghai Composite Index plunged by 2.9 percent.

The major European markets also moved to the downside on the day. While the German DAX Index tumbled by 1.1 percent, the French CAC 40 Index fell by 0.6 percent and the U.K.’s FTSE 100 Index dropped by 0.4 percent.

In the bond market, treasuries closed roughly flat after recovering from an early move to the downside. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, edged down by less than a basis point to 3.175 percent.

Looking Ahead

Earnings news may impact trading on Friday, with American Express (AXP), E*Trade (ETFC), and PayPal (PYPL) among the companies releasing their quarterly results after the close of today’s trading.

Honeywell (HON) and Procter & Gamble (PG) are also among the companies due to report their quarterly results before the start of trading on Friday.

A report on existing home sales in the month of September may also attract some attention on Friday, with existing home sales expected to drop by 0.7 percent.

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