Stocks Close Modestly Lower After Early Buying Interest Fades - U.S. Commentary

(RTTNews) - After once again failing to sustain an early upward move, stocks turned lower over the course of the trading day on Thursday. While the Dow and the S&P 500 reached record intraday highs in early trading, the major averages all pulled back into negative territory.

The major averages climbed off their worst levels going into the close but remained stuck in the red. The Dow edged down 8.70 points or 0.1 percent to 17,069.58, the Nasdaq slipped 10.28 points or 0.2 percent to 4,562.29 and the S&P 500 dipped 3.07 points or 0.2 percent to 1,997.65.

The early strength on Wall Street partly reflected a positive reaction to the European Central Bank's surprise decision to cut interest rates to record lows.

Following its monetary policy meeting, the ECB said it is lowering all three of its main interest rates by 10 basis points, reducing the benchmark rate to 0.05 percent.

ECB President Mario Draghi also said the bank plans to purchase asset-backed securities to boost the economy and combat the threat of deflation.

Upbeat economic data also generated some buying interest, including a report from the Instituted for Supply Management showing an unexpected acceleration in the pace of service sector growth in the month of August.

The ISM said its non-manufacturing index climbed to 59.6 in August from 58.7 in July, with a reading above 50 indicating growth in the service sector.

The modest increase by the non-manufacturing index came as a surprise to economists, who had expected the index to dip to a reading of 57.5.

However, buying interest waned over the course of the morning, and uncertainty about Friday's monthly jobs report subsequently contributed to the pullback by the broader markets.

The report is expected to show an increase of about 225,000 jobs in August compared to the addition of 209,000 jobs in July.

Before the start of trading, payroll processor ADP released a report showing another notable increase in U.S. private sector employment in the month of August, although the pace of job growth once again came in below economist estimates.

ADP said private sector employment rose by 204,000 jobs in August following a downwardly revised increase of 212,000 jobs in July. Economists had been expecting an increase of about 220,000 jobs.

A separate report from the Labor Department showed that first-time claims for U.S. unemployment benefits rose by slightly more than expected in the week ended August 30th.

Sector News

Gold stocks showed a substantial move to the downside over the course of the trading day, dragging the NYSE Arca Gold Bugs Index down by 3.6 percent. With the drop, the index ended the session at its lowest closing level in over two months.

The weakness among gold stocks came amid a decrease by the price of the precious metal, as gold for December delivery fell $3.80 to $1,266.50 an ounce.

Significant weakness also emerged among oil service stocks, which moved lower along with the price of crude oil. With crude for October delivery tumbling $1.09 to $94.45 a barrel, the Philadelphia Oil Service Index dropped by 1.9 percent.

Biotechnology stocks also came under pressure on the day, resulting in a 1.5 percent loss by the NYSE Arca Biotechnology Index. The index pulled back further off the record closing high set on Tuesday.

Natural gas, networking, and computer hardware also saw notable weakness, while strength remained visible among trucking and retail stocks.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region turned in a mixed performance during trading on Thursday. Japan's Nikkei 225 Index dropped by 0.3 percent, while China's Shanghai Composite Index advanced by 0.8 percent.

Meanwhile, the major European markets all moved higher on the day. While the U.K.'s FTSE 100 Index edged up by 0.1 percent, the German DAX Index jumped by 1 percent and the French CAC 40 Index surged up by 1.7 percent.

In the bond market, treasuries moved back to the downside after turning higher over the course of the previous session. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, rose by 3.8 basis points to 2.448 percent.

Looking Ahead

Economic data is likely to be in the spotlight during trading on Friday, as the Labor Department is scheduled to release its closely watched monthly jobs report.