U.S. Stocks Show Significant Move Back To The Downside

Stocks moved sharply lower during trading on Thursday, largely offsetting the substantial rebound seen over the two preceding sessions. With the steep drop on the day, the tech-heavy Nasdaq slumped to its lowest closing level in well over a month.

The major averages climbed well off their worst levels late in the session but remained firmly negative. The Nasdaq plunged 233.25 points or 2.2 percent to 10,476.12, the S&P 500 dove 56.05 points or 1.5 percent to 3,822.39 and the Dow tumbled 348.99 points or 1.1 percent to 33,027.49.

The pullback on Wall Street came as some traders cashed in on Wednesday’s gains amid ongoing concerns about the outlook for interest rates and the global economy.

Stocks saw further downside following the release of a report from the Conference Board showing a continued slump by its reading on leading U.S. economic indicators in the month of November.

The report said the leading economic index tumbled by 1.0 percent in November after sliding by a revised 0.9 percent in October.

Economists had expected the leading economic index to decrease by 0.5 percent compared to the 0.8 percent drop originally reported for the previous month.

“The US LEI suggests the Federal Reserve’s monetary tightening cycle is curtailing aspects of economic activity, especially housing,” said said Ataman Ozyildirim, Senior Director, Economics, at The Conference Board.

He added, “As a result, we project a US recession is likely to start around the beginning of 2023 and last through mid-year.”

Traders were also looking ahead to tomorrow’s report on personal income and spending, which includes a reading on inflation said to be preferred by the Fed.

With Fed Chair Jerome Powell saying the central bank will require “substantially more evidence” inflation is on a sustained downward trend before halting its interest rate hikes, traders are likely to keep a close eye on the inflation reading.

Sector News

After turning in some of the market’s best performances on Wednesday, semiconductor stocks showed a substantial move back to the downside.

Reflecting the weakness in the sector, the Philadelphia Semiconductor Index plunged by 4.2 percent to its lowest closing level in well over a month.

Chipmaker Micron Technology (MU) helped lead the sector after reporting a wider than expected fiscal first quarter loss. The company also announced plans to cut about 10 percent of its workforce.

Energy stocks also saw considerable weakness on the day, with the Philadelphia Oil Service Index and the NYSE Arca Oil Index tumbled by 3.0 percent and 2.5 percent, respectively.

The weakness among energy stocks came as the price of crude slid $0.80 to $77.49 a barrel after reaching a high of $79.90 a barrel.

News of the cancellation of hundreds of flights ahead of a severe winter storm also weighed on airline stocks, dragging the NYSE Arca Airline Index down by 2.0 percent.

Software, networking and retail stocks also showed notable moves to the downside 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 rose by 0.5 percent, while Hong Kong’s Hang Seng Index spiked by 2.7 percent.

Meanwhile, the major European markets moved to the downside on the day. While the German DAX Index tumbled by 1.3 percent, the French CAC 40 Index slumped by 1.0 percent and the U.K.’s FTSE 100 Index fell by 0.4 percent.

In the bond market, treasuries fluctuated over the course of the session before closing modestly higher. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, edged down by 1.5 basis points to 3.669 percent.

Looking Ahead

While the inflation reading is likely to be in the spotlight on Friday, traders are also likely to keep an eye on reports on durable goods orders, new home sales and consumer sentiment.

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