Uncertainty About Monetary Policy Leads To Weakness On Wall Street

(RTTNews) - Following the mixed performance seen in the previous session, stocks moved mostly lower during trading on Thursday. With the drop on the day, the tech-heavy Nasdaq and the S&P 500 pulled back off yesterday's record highs.

The major averages all ended the day firmly in negative territory. The Dow slid 128.99 points or 0.5 percent to 27,140.98, the Nasdaq tumbled 82.96 points or 1 percent to 8,238.54 and the S&P 500 fell 15.89 points or 0.5 percent to 3,003.67.

The weakness on Wall Street partly reflected renewed uncertainty about the near-term outlook for monetary policy in the U.S. and Europe.

The European Central Bank initially generated some positive sentiment by leaving interest rates unchanged but signaling a future rate cut.

The ECB's statement said the bank expects rates to remain at "present or lower levels at least through the first half of 2020" after previously saying it only expected rates to remain at "present levels."

However, ECB President Mario Draghi's subsequent comments calling the risk of a recession "pretty low" offset optimism about a sharp reduction in rates.

The ECB has signaled that it is likely to cut rates to address persistently low inflation rather than an economic downturn.

A report from the Commerce Department showing a substantial rebound in U.S. durable goods orders also dented investor optimism about a near-term rate cut by the Federal Reserve.

The Commerce Department said durable goods orders spiked by 2.0 percent in June after plunging by a revised 2.3 percent in May. Economists had expected durable goods to climb by 0.7 percent. . The report also said orders for non-defense capital goods excluding aircraft, an indicator of business spending, jumped by 1.9 percent in June after edging up by 0.3 percent in May,

"Nevertheless, with the incoming global data still deteriorating and domestic capacity utilization falling, we still expect overall investment to remain weak in the second half of the year," said Michael Pearce, Senior U.S. Economist at Capital Economics.

A separate report from the Labor Department showed an unexpected pullback in initial jobless claims in the week ended July 20th.

Traders were also digesting the latest batch of earnings news from big-name companies like Ford (F), Facebook (FB), and 3M (MMM) which all moved lower on the day.

Sector News

Oil service stocks showed a substantial move to the downside on the day, dragging the Philadelphia Oil Service Index down by 4.3 percent.

The sell-off by oil service stocks came despite a modest increase by the price of crude oil, as crude for September delivery edged up $0.14 to $56.02 a barrel.

National gas stocks also moved sharply lower despite an increase by their associated commodity, with the NYSE Arca Natural Gas Index slumping by 3.4 percent even as natural gas for September delivery rose $0.018 to $2.220 per million BTUs.

Significant weakness was visible among gold stocks, which moved lower along with the price of their associated commodity.

With gold for August delivery sliding $8.90 to $1,414.70 an ounce, the NYSE Arca Gold Bugs Index tumbled by 2.1 percent.

Tobacco, biotechnology, semiconductor and brokerage stocks also saw considerable weakness 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 moved mostly higher during trading on Thursday. Japan's Nikkei 225 Index edged up by 0.2 percent, while China's Shanghai Composite Index climbed by 0.5 percent.

Meanwhile, the major European markets turned lower over the course of the session. While the German DAX Index tumbled by 1.3 percent, the French CAC 40 Index fell by 0.5 percent and the U.K.'s FTSE 100 Index dipped by 0.2 percent.

In the bond market, treasuries showed a significant downturn after seeing initial strength. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, rose by 2.4 basis points to 2.074 percent after hitting a low of 2.012 percent.

Looking Ahead

Reaction to the latest batch of earnings news may drive trading on Friday, with Google parent Alphabet (GOOGL), Amazon (AMZN), Intel (INTC), Starbucks (SBUX) and Mattel (MAT) all releasing their quarterly results after the close of today's trading.

McDonald's (MCD), Colgate-Palmolive (CL) and Twitter (TWTR) are also among the companies due to report their quarterly results before the start of trading on Friday.

Trading may also be impacted by reaction to the Commerce Department's preliminary report on U.S. GDP in the second quarter. GDP is expected to climb by 1.8 percent.