Tech Sell-Off Leads To Substantial Weakness On Wall Street - U.S. Commentary

(RTTNews) - After moving notably higher over the two previous sessions, stocks showed a substantial move back to the downside during trading on Thursday. Technology stocks helped to lead the sell-off, contributing to a particularly sharp drop by the tech-heavy Nasdaq.

The Nasdaq turned in its worst performance since November of 2011, plunging 129.73 points or 3.1 percent to a two-month closing low of 4,054.11. The Dow tumbled 266.96 points or 1.6 percent to 16,170.22 and the S&P 500 plummeted 39.10 points or 2.1 percent to 1,833.08.

The sell-off on Wall Street was partly due to profit taking following the rally seen late in the previous session, which reflected easing concerns about the outlook for interest rates.

Traders reacted positively to the minutes of the latest Federal Reserve meeting on Wednesday, as they revealed that some participants were concerned that the increase in the median projection for the federal funds rate could be misconstrued.

Analysts said the sharp pullback also reflected concerns about the valuation of momentum stocks, pointing specifically to the biotechnology sector.

Uncertainty about the impending earnings season may also have generated some negative sentiment, leading traders to look for safer havens.

JP Morgan (JPM) and Wells Fargo (WFC) are due to report their quarterly results before the start of trading on Friday, although earnings season won't really start to pick up steam until next week.

Meanwhile, traders seemed to shrug off a report from the Labor Department showing that initial jobless claims fell to a nearly seven-year low in the week ended April 5th.

The Labor Department said initial jobless claims dropped to 300,000, a decrease of 32,000 from the previous week's revised figure of 332,000.

Economists had expected jobless claims to edge down to 320,000 from the 326,000 originally reported for the previous week.

With the bigger than expected decrease, jobless claims fell to their lowest level since hitting 297,000 in the week ended May 12, 2007.

Sector News

While most of the major sectors came under pressure, biotechnology stocks posted particularly steep losses on the day. The NYSE Arca Biotechnology Index plummeted by 5.6 percent, offsetting yesterday's 3.8 percent gain and setting a new two-month closing low.

Pharmacyclics (PCYC) and Incyte (INCY) turned in two of the biotech sector's worst performances, tumbling by 9.6 percent and 9.4 percent, respectively.

Electronic storage stocks also showed a substantial move to the downside, dragging the NYSE Arca Disk Drive Index down by 3.8 percent. The index also set a two-month closing low amid steep losses by Hutchinson Technology (HTCH) and Imation (IMN).

Semiconductor, software, and networking stocks also saw significant weakness, contributing to the sharp drop by the tech-heavy Nasdaq.

Considerable weakness was also visible outside of the tech sector, however, with healthcare, brokerage, and airline stocks posting notable losses on the day.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved mostly higher on Thursday. While Japan's Nikkei 225 Index closed just above the unchanged line, Hong Kong's Hang Seng Index and China's Shanghai Composite Index jumped by 1.5 percent and 1.4 percent, respectively.

Meanwhile, the major European markets ended the day mixed. The U.K.'s FTSE 100 Index edged up by 0.1 percent, while the German DAX Index dropped by 0.6 percent and the French CAC 40 Index slid by 0.7 percent.

In the bond market, treasuries moved notably higher, extending the upward trend seen throughout the past week. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, fell by 5.6 basis points to 2.628 percent.

Looking Ahead

Trading on Friday may be impacted by reaction to quarterly results from JP Morgan and Wells Fargo along with reports on producer prices and consumer sentiment.