Stocks Give Back Ground Following Yesterday's Rally - U.S. Commentary

(RTTNews) - After moving sharply higher over the course of the previous session, stocks gave back some ground during trading on Thursday. The major averages saw modest weakness early in the session and slid firmly into negative territory as the day progressed.

The major averages ended the session just off their worst levels of the day. The Dow fell 112.58 points or 0.5 percent to 21,002.97, the Nasdaq slid 42.81 points or 0.7 percent to 5,861.22 and the S&P 500 dropped 14.04 points or 0.6 percent to 2,381.92.

Profit taking contributed to the pullback by stocks following yesterday's rally, which lifted the major averages to new record closing highs.

Traders were also reacting to indications of a continued increase in the chance that the Federal Reserve will raise interest rates at its next monetary policy meeting later this month.

CME Group's FedWatch tool is now showing a 77.5 percent probability of quarter point rate hike, up from 66.4 percent yesterday.

Fed Governor Jerome Powell told CNBC a rate hike in March is on the table for discussion in light of current economic conditions.

Potentially adding to rate hike expectations, the Labor Department released a report showing that initial jobless claims fell to their lowest level in over forty years in the week ended February 25th.

The report said initial jobless claims dropped to 223,000, a decrease of 19,000 from the previous week's revised level of 242,000.

The decline in jobless claims came as a surprise to economists, who had expected claims to inch up to 245,000 from the 244,000 originally reported for the previous month.

With the unexpected decrease, jobless claims fell to their lowest level since hitting 222,000 in the week ended March 31, 1973.

Sector News

Gold stocks showed a substantial move back to the downside on the day, dragging the NYSE Arca Gold Bugs Index down by 4.4 percent. With the drop, the index fell to its lowest closing level in two months.

The weakness among gold stocks came amid a notable decrease by the price of the precious metal, with gold for April delivery tumbling $17.10 to $1,232.90 an ounce.

After moving sharply higher in the previous session, steel stocks also showed a significant pullback. The NYSE Arca Steel Index plunged by 4.1 percent after jumping by 3.3 percent on Wednesday.

Airline, oil service, and financial stocks also saw considerable weakness after moving notably higher in the previous session. Most of the other major sectors also moved to the downside.

Other Markets

In overseas trading, stock market across the Asia-Pacific region turned in a mixed performance during trading on Thursday. Japan's Nikkei 225 Index advanced by 0.9 percent, while Hong Kong's Hang Seng Index edged down by 0.2 percent.

The major European markets finished the day little changed. While the French CAC 40 Index crept up by 0.1 percent, the U.K.'s FTSE 100 Index closed just below the unchanged line and the German DAX Index dipped by 0.1 percent.

In the bond market, treasuries saw further downside following the sell-off seen in the previous session. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, rose by 2.6 basis points to 2.489 percent.

Looking Ahead

An Institute for Supply Management report on service sector activity in the month of February may attract some attention on Friday. The service sector index is expected dip to 56.2 in February from 56.5 in January.

Traders are also likely to keep an eye on remarks by Federal Reserve Chair Janet Yellen, who is due to speak at the Executives' Club of Chicago.

On the earnings front, Autodesk (ADSK), Costco (COST), and Marvell (MRVL) are among the companies releasing their quarterly results after the close of today's trading.

Discount retailer Big Lots (BIG) is also due to release its fourth quarter results before the start of trading on Friday.