Stocks Pull Back On The Day But Post Strong Gains For The Year - U.S. Commentary

(RTTNews) - After moving moderately higher in morning trading on Wednesday, stocks showed a significant downturn over the course of the trading session. While the pullback was exaggerated by light volume, the major averages showed a rather steep drop.

The major averages saw further downside going into the close, ending the session near their worst levels of the day. The Dow tumbled 160.00 points or 0.9 percent to 17,823.07, the Nasdaq slid 41.39 points or 0.9 percent to 4,736.05 and the S&P 500 slumped 21.45 points or 1 percent to 2,058.90.

Despite the pullback on the day, the major averages all moved notably higher for the year. The Dow surged up by 7.5 percent, while the Nasdaq and the S&P 500 soared by 13.4 percent and 11.4 percent, respectively.

The pullback by stocks may partly have reflected profit taking on the last trading day of 2014 following the strength seen for much of the year.

Trading activity remained relatively subdued, however, with many traders away from their desks ahead of tonight's New Year's Eve festivities and the New Year's Day holiday on Thursday.

Negative sentiment may also have been generated by report from the Labor Department showing a bigger than expected rebound in initial jobless claims in the week ended December 27th.

The report said initial jobless claims climbed to 298,000, an increase of 17,000 from the previous week's revised level of 281,000. Economists had expected jobless claims to rise to 290,000.

MNI Indicators also released a report showing that its Chicago business barometer fell to a five-month low in December, indicating a notably slower rate of growth in Chicago-area business activity.

On the other hand, the National Association of Realtors released a report showing a bigger than expected rebound in pending home sales in November.

NAR said its pending home sales index rose 0.8 percent to 104.8 in November after tumbling 1.2 percent to a downwardly revised 104.0 in October. Economists had been expecting the index to increase by about 0.5 percent.

A pending home sale is one in which a contract was signed but not yet closed. Normally, it takes four to six weeks to close a contracted sale.

Sector News

Utilities stocks showed a substantial move to the downside on the day, dragging the Dow Jones Utilities Average down by 1.8 percent. With the drop, the index pulled back further off the record closing high that it set on Monday.

Despite the pullback over the past two sessions, the utilities sector turned in one of the best performances on the year. The Dow Jones Utilities Average posted a yearly gain of 26 percent.

Significant weakness also emerged among commercial real estate stocks, as reflected by the 1.6 percent loss posted by the Morgan Stanley REIT Index. Omega Healthcare Investors (OHI) and Realty Income (O) posted notable losses.

Electronic storage, banking, networking, and chemical stocks also came under pressure on the day, moving lower along with most of the other major sectors.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region turned in a mixed performance on Wednesday, although several markets were closed for the day. Hong Kong's Hang Seng Index rose by 0.4 percent, while Australia's All Ordinaries Index edged down by 0.1 percent.

Meanwhile, the European markets saw some strength in an abbreviated session. The U.K.'s FTSE 100 Index rose by 0.3 percent, while the French CAC 40 advanced by 0.6 percent. The German market was closed on the day.

In the bond market, treasuries moved moderately higher on the day, extending a recent upward trend. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, dipped 2.0 basis points to 2.17 percent.

Looking Ahead

Following the New Year's Day holiday on Thursday, trading on Friday may be impacted by the release of reports on manufacturing activity and construction spending.