Stocks Climb Off Worst Levels But Still Close Firmly Negative - U.S. Commentary

(RTTNews) - After falling sharply early in the session, stocks regained some ground over the course of the trading day on Wednesday but remained firmly in negative territory. With the pullback on the day, the major averages offset the gains posted in the previous session.

The major averages all ended the day in the red, although the tech-heavy Nasdaq underperformed its counterparts. While the Nasdaq tumbled 96.78 points or 1.2 percent to 7,774.12, the Dow fell 137.51 points or 0.5 percent to 25,162.41 and the S&P 500 slid 21.59 points or 0.8 percent to 2,818.37.

Renewed concerns about Turkey contributed to the early sell-off on Wall Street after the Turkish government announced an increase in tariffs on American cars, alcohol and cigarettes.

The move is likely to intensify the dispute between the U.S. and Turkey, which recently dragged the Turkish lira down to a record low.

Meanwhile, in an effort to deter short-selling in the nation's currency, Turkey's banking regulator said it would limit banks' currency swap transactions.

The clash between the U.S. and Turkey also comes amid the ongoing trade dispute between the U.S. and China, which has raised concerns about the global economy.

Traders were also digesting a slew of U.S. economic data, including a report from the Federal Reserve showing a smaller than expected increase in industrial production in the month of July.

The Fed said industrial production inched up by 0.1 percent in July after jumping by an upwardly revised 1.0 percent in June. Economists had expected production to rise by 0.3 percent.

A separate report from the Commerce Department showed retail sales climbed by more than expected in July, although the report also showed a significant downward revision to the sale growth in June.

The Commerce Department said retail sales rose by 0.5 percent in July compared to economist estimates for a 0.1 percent uptick.

However, the report also showed the increase in retail sales in June was downwardly revised to 0.2 percent from the 0.5 percent previously reported.

Partly reflecting growing affordability concerns, the National Association of Home Builders also released a report showing a modest deterioration in homebuilder confidence in the month of August.

The report said the NAHB/Wells Fargo Housing Market Index edged down to 67 in August from 68 in June, matching economist estimates.

Sector News

Gold stocks showed a substantial move to the downside on the day, dragging the NYSE Arca Gold Bugs Index down by 6.1 percent to its lowest closing level in well over two years.

The sell-off by gold stocks came amid a significant decrease by the price of the precious metal, as gold for December delivery tumbled $15.70 to $1,185 an ounce.

A sharp drop by the price of crude oil also weighed on energy stocks, with crude for September delivery plunging $2.03 to $65.01 a barrel.

Reflecting the weakness in the energy sector, the Philadelphia Oil Service Index and the NYSE Arca Oil Index both plummeted by 4.1 percent, while the NYSE Arca Natural Gas Index slumped by 3.4 percent.

Steel, biotechnology, retail and semiconductor stocks also saw considerable weakness on the day, while some strength was visible among utilities and real estate stocks.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved mostly lower during trading on Wednesday. Japan's Nikkei 225 Index slid by 0.7 percent, while China's Shanghai Composite Index plunged by 2.1 percent.

The major European markets also came under pressure on the day. While the French CAC 40 Index plummeted by 1.8 percent, the German DAX Index and the U.K.'s FTSE 100 Index tumbled by 1.6 percent and 1.5 percent, respectively.

In the bond market, treasuries showed a strong move back to the upside after closing lower in the two previous sessions. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, fell by 4.3 basis points to 2.852 percent.

Looking Ahead

Trading on Thursday may be impacted by developments regarding Turkey as well as U.S. economic reports on weekly jobless claims, housing starts, and Philadelphia-area manufacturing activity.

On the earnings front, Cisco Systems (CSCO) and NetApp (NTAP) are among the companies releasing their quarterly results after the close of today's trading.

Retail giants Wal-Mart (WMT) and J.C. Penney (JCP) are also due to report their results before the start of trading on Thursday.