Stocks Close In The Red But Well Off Worst Levels - U.S. Commentary

(RTTNews) - After coming under pressure in early trading on Wednesday, stocks regained some ground over the course of the session but still closed in the red. The losses on the day partly offset the strength that was seen in the previous session.

The major averages all closed in negative territory, although the Dow edged down only 2.09 points or less than a tenth of a percent to 17,685.73. The Nasdaq slid 26.73 points or 0.6 percent to 4,675.71 and the S&P 500 dipped 3.08 points or 0.2 percent to 2,048.72.

Profit taking contributed to the early weakness on Wall Street following recent strength in the markets, which lifted the Dow and the S&P 500 to new record closing highs on Tuesday. The Nasdaq also reached its best closing level since 2000.

Traders also reacted negatively to a report from the Commerce Department showing a drop in housing starts, although the report also showed a jump in building permits.

The markets experienced considerable volatility in mid-afternoon trading following the release of the minutes of the Federal Reserve's October monetary policy meeting.

The minutes suggested that the central bank was not worried about the sharp pullback seen on Wall Street and signs of economic weakness overseas.

While the Fed acknowledged a somewhat weaker economic outlook and increased downside risks in Europe, China, and Japan, many participants saw the effects on the domestic economy as likely to be quite limited.

The minutes also showed that the members of the Fed debated how best to communicate their outlook for higher interest rate hikes.

The Fed's statement reiterated its pledge to keep rates at historically low levels for a "considerable time," although the minutes said some members wanted to remove that statement in favor of a more specific time line.

Others worried that removing the phrase would unduly signal a significant shift in policy, resulting in tighter market conditions.

Paul Ashworth, Chief U.S. Economist at Capital Economics, said, "Overall, there is nothing here to suggest that the market volatility persuaded officials to push back their expectations of when the first rate hike would be required next year."

Despite the lower close by the broader markets, shares of Lowe's (LOW) moved sharply higher on the day after the home improvement retailer reported better than expected third quarter results and raised its full-year guidance.

Discount retailer Target (TGT) also posted a substantial gain after reporting third quarter results that exceeded analyst estimates.

Sector News

While many of the major sectors closed well off their worst levels, substantial weakness remained visible among gold stocks. The NYSE Arca Gold Bugs Index tumbled by 6 percent, giving back ground after closing higher in the three previous sessions.

The pullback by gold stocks came amid a decrease by the price of the precious metal, with gold for December delivery sliding $3.20 to $1,193.90 an ounce.

Significant weakness also remained visible among steel stocks, with the NYSE Arca Steel Index falling by 2.1 percent. With the loss, the index hit its lowest closing level in well over a year.

Cliffs Natural Resources (CLF) helped to lead the steel sector lower, plunging by 20 percent after announcing that it is pursuing exit options for its Eastern Canadian iron ore operations.

Telecom, computer hardware, and software stocks also saw notable weakness on the day, while considerable strength emerged among natural gas 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 dipped by 0.3 percent, while Hong Kong's Hang Seng Index fell by 0.7 percent.

Meanwhile, the major European markets turned in a mixed performance on the day. While the U.K.'s FTSE 100 Index edged down by 0.2 percent, the French CAC 40 Index and the German DAX Index crept up by 0.1 percent and 0.2 percent, respectively.

In the bond market, treasuries saw considerable volatility following the release of the Fed minutes before closing in the red. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, rose by 2.9 basis points at 2.351 percent.

Looking Ahead

A slew of U.S. economic data is likely to be in focus on Thursday, with traders likely to keep an eye on reports on consumer prices, jobless claims, and existing home sales.