Stocks Sell Off Amid Renewed Concerns About Fed Stimulus - U.S. Commentary

(RTTNews) - With upbeat economic data raising concerns about the outlook for the Federal Reserve's stimulus program, stocks moved sharply lower over the course of the trading day on Thursday. Traders also used the pullback as an opportunity to cash in on some of the recent strength in the markets.

The major averages saw further downside going into the close, ending the session near their worst levels of the day. The Dow tumbled 152.90 points or 1 percent to 15,593.98, the Nasdaq plummeted 74.61 points or 1.9 percent to 3,857.33 and the S&P 500 plunged 23.34 points or 1.3 percent to 1,747.15.

The sell-off on Wall Street came following the release of a report from the Commerce Department showing stronger than expected U.S. GDP growth in the third quarter.

While the report provides a relatively upbeat sign regarding the economy, it added to worries that the Fed may begin scaling back its asset purchase program sooner than anticipated.

The Commerce Department said U.S. gross domestic product rose by 2.8 percent in the third quarter compared to economist estimates for an increase of 2.0 percent.

GDP growth accelerated from the 2.5 percent increase in the second quarter, reflecting a deceleration in imports and accelerations in private inventory investment and state and local government spending.

Paul Ashworth, Chief U.S. Economist at Capital Economics, said, "Overall, the pick-up in GDP growth will presumably add to the speculation that the Fed might yet begin tapering its asset purchases in December."

"Frankly, it's hard to know exactly what precise improvement Fed officials are looking for after all the flip-flopping," he added. "October's payrolls figures, due out tomorrow, will provide a little more insight."

A separate report from the Labor Department showed that initial jobless claims fell for the fourth straight week, coming in roughly in line with economist estimates.

The worries about the outlook for the Fed's stimulus program overshadowed news that the European Central Bank unexpectedly cut its main refinancing rate by 25 basis points to a new record low of 0.25 percent.

Despite the pullback by the broader markets, shares of Twitter (TWTR) spiked sharply higher in their debut on the New York Stock Exchange.

Twitter surged up by 72.7 percent after the social media giant priced its initial public offering of 70 million shares at $26 per share.

Sector News

Most of the major sectors showed notable moves to the downside, reflecting the broad based weakness that emerged on Wall Street.

Telecom stocks saw substantial weakness on the day, dragging the NYSE Arca Telecom Index down by 2.8 percent. With the loss, the index pulled back well off yesterday's five-year closing high.

CenturyLink (CTL) helped to lead the telecom sector lower, tumbling by 6.1 percent after providing disappointing fourth quarter earnings guidance.

Significant weakness was also visible among gold stocks, as reflected by the 2.4 percent loss posted by the NYSE Arca Gold Bugs Index. The weakness in the sector came as gold for December delivery fell $9.30 to $1,308.50 an ounce.

Tobacco, natural gas, airline, and steel stocks also saw considerable weakness, with Schweitzer-Mauduit (SWM) leading the tobacco sector lower after reporting weaker than expected third quarter results.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved mostly lower during trading on Thursday. Japan's Nikkei 225 Index fell by 0.8 percent, while Hong Kong's Hang Seng Index ended the day down by 0.7 percent.

Meanwhile, the major European markets turned mixed over the course of the trading day. While the German DAX Index rose by 0.4 percent, the French CAC 40 Index edged down by 0.1 percent and the U.K.'s FTSE 100 Index dropped by 0.7 percent.

In the bond market, treasuries moved moderately higher on the news of the surprise ECB rate cut. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, fell by 2.7 basis points to 2.613 percent.

Looking Ahead

Reaction to the October jobs report is likely to drive trading on Friday, although the data is likely to be distorted by the effects of the government shutdown.

The jobs report is still likely to overshadow the release of separate reports on personal income and spending and consumer sentiment.

On the earnings front, Disney (DIS), Priceline (PCLN), Groupon (GRPN), and Nvidia (NVDA) are among the companies releasing their quarterly results after the close of today's trading.