Stocks Remain Under Pressure After Early Downturn - U.S. Commentary

(RTTNews) - Stocks remain mostly negative in mid-day trading on Thursday after turning lower earlier in the session. The downward move on the day is extending the notable pullback that was seen over the course of the trading day on Wednesday.

Currently, the major averages are near their worst levels of the day. The Dow is down 90.83 points or 0.5 percent at 17,638.85, the Nasdaq is down 33.71 points or 0.7 percent at 5,089.52 and the S&P 500 is down 13.17 points or 0.6 percent at 2,066.34.

The weakness on Wall Street comes on the heels of a sell-off by European stocks, which reacted negatively to remarks by European Central Bank president Mario Draghi.

While Draghi announced an extension of the ECB's asset purchase program until March of 2017, traders seem disappointed the bank did not go further.

Draghi's press conference came after the ECB cut its deposit rate by a relatively modest 10 basis points to a new low of negative 0.3 percent earlier in the day.

"Santa Mario did not turn into the Grinch," said Carsten Brzeski, ING Germany's chief economist. "However, his long-awaited early Christmas afternoon left many market participants disappointed like small kids who receive less and smaller presents than expected on Christmas Eve."

Traders are also reacting to Federal Reserve Chair Janet Yellen's testimony before the congressional Joint Economic Committee.

Yellen's prepared remarks were essentially unchanged from a speech she delivered Wednesday, when she seemed to signify the central bank remains on track to raise interest rates later this month.

On the U.S. economic front, the Institute for Supply Management released a report this morning showing that the pace of growth in U.S. service sector activity slowed more than expected in November.

The ISM said its non-manufacturing index dropped to 55.9 in November from 59.1 in October. While a reading above 50 indicates continued growth in the service sector, economists had expected the index to show a more modest pullback to 58.2.

A separate report from the Commerce Department said factory orders rose slightly more than expected in October, while the Labor Department said jobless claims rose in line with estimates in the week ended November 28th.

Sector News

Adding to the steep losses posted in the previous session, natural gas stocks have moved sharply lower on the day. The NYSE Arca Natural Gas Index has tumbled by 2.4 percent to its lowest intraday level in over five years.

Chesapeake Energy (CHK) is leading the sector lower after announcing a private offering of up to $1.5 billion of its new 8.00% Senior Secured Second Lien Notes due 2022.

Railroad stocks are also seeing significant weakness, with the Dow Jones Railroads Index slumping by 1.9 percent. Kansas City Southern (KSU) and Union Pacific (UNP) are posting notable losses.

Considerable weakness is also visible among telecom, commercial real estate and health care stocks, while gold stocks have shown a strong move to the upside.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region turned in another mixed performance on Thursday. China's Shanghai Composite Index surged up by 1.4 percent and Japan's Nikkei 225 closed slightly higher, while Hong Kong's Hang Seng Index fell by 0.3 percent.

Meanwhile, the major European markets moved sharply lower in reaction to Draghi's comments. While the U.K.'s FTSE 100 Index slumped by 2.3 percent, the German DAX Index and the French CAC 40 Index both plunged by 3.6 percent.

In the bond market, treasuries have shown a steep drop on the day, extending the pullback seen in the previous session. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, has jumped by 12.3 basis points to 2.301 percent.