Stocks Seeing Continued Weakness After Early Sell-Off - U.S. Commentary

(RTTNews) - After moving sharply lower early in the session, stocks continue to see considerable weakness in mid-day trading on Thursday. A negative reaction to the morning's barrage of economic data continues to weigh on the markets.

The major averages have recently climbed well off their worst levels of the day but remain firmly negative. The Dow is down 172.11 points or 1.1 percent at 15,165.55, the Nasdaq is down 46.88 points or 1.3 percent at 3,622.39 and the S&P 500 is down 18.52 points or 1.1 percent at 1,666.87.

The sell-off on Wall Street comes following the release of a slew of U.S. economic data, including a report from the Labor Department showing that initial jobless claims fell to their lowest level in almost six years.

The Labor Department said initial jobless claims fell to 320,000 in the week ended August 10th, a decrease of 15,000 from the previous week's revised figure of 335,000. Economists had expected jobless claims to edge down to 330,000.

With the bigger than expected decrease, initial jobless claims fell to their lowest level since hitting 316,000 in the week ended October 6, 2007.

While the data provides further evidence of improvement in the job market, the report has also added to concerns about the Federal Reserve scaling back its stimulus program at its next meeting.

Peter Boockvar, chief market analyst at the Lindsey Group, said, "The continued reduction in the pace of firing's to the slowest since the Fall of 2007 should point the Fed further into the camp of taper sooner rather than later."

Traders are also digesting weaker than expected readings on manufacturing activity in the New York and Philadelphia areas in August as well as a Fed report showing that U.S. industrial production was unchanged in July.

A separate Labor Department report showed that consumer prices rose in line with estimates in July, while the National Association of Home Builders reported homebuilder confidence at a nearly eight-year high in August.

Negative sentiment has also been generated by a sharp drop by shares of Cisco (CSCO), with the networking giant falling by 6.8 percent after reporting slightly better than expected fourth quarter results but providing first quarter guidance toward the low end of analyst estimates.

In a conference call, Cisco also said it would cut 4,000 jobs, or 5 percent of its global workforce, to "rebalance" its employee base.

Retail giant Wal-Mart (WMT) is also under pressure after reporting second quarter earnings in line with estimates but cutting its full-year outlook.

Sector News

While most of the major sectors have moved to the downside on the day, networking stocks are seeing considerable weakness in mid-day trading. The NYSE Arca Networking Index is down by 2.6 percent, pulling back off the two-year closing high set on Wednesday.

Cisco has helped to lead the networking sector lower, although Ciena (CIEN) and Alcatel-Lucent (ALU) are also posting steep losses on the day.

Significant weakness has also emerged among healthcare provider stocks, as reflected by the 2.2 percent loss being posted by the Morgan Stanley Healthcare Provider Index. Community Health Systems (CYH) and Kindred Healthcare (KND) are turning in two of the sector's worst performances.

Commercial real estate stocks have also shown a substantial move to the downside, dragging the Morgan Stanley REIT Index down by 2 percent. The drop has pulled the index down to its lowest intraday level in well over a month.

Tobacco, semiconductor, steel, and software stocks are also posting notable losses, reflecting broad based weakness in the markets.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved mostly lower during trading on Thursday. Japan's Nikkei 225 Index plummeted by 2.1 percent, while China's Shanghai Composite Index ended the day down by 0.9 percent.

The major European markets also moved to the downside on the day. While the U.K.'s FTSE 100 Index tumbled by 1.6 percent, the German DAX Index and the French CAC 40 Index fell by 0.7 percent and 0.5 percent, respectively.

In the bond market, treasuries have climbed off their worst levels but continue to see notable weakness. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, is up by 6.4 basis points at 2.776 percent.