Dow Sets New Record Closing High But Nasdaq Posts Steep Loss - U.S. Commentary

(RTTNews) - With traders digesting OPEC's decision to curtail oil output as well as the latest batch of U.S. economic data, stocks turned in a mixed performance on Thursday. While the Dow reached a new record closing high, the tech-heavy Nasdaq showed a notable decline.

The Dow rose 68.35 points or 0.4 percent to 19,191.93, but the Nasdaq tumbled 72.57 points or 1.4 percent to 5,251.11 and the S&P 500 fell 7.73 points or 0.4 percent to 2,191.08.

The mixed performance on Wall Street came as traders continued to react to yesterday's news that OPEC plans to reduce oil production by about 1.2 million barrels to 32.5 million barrels a day.

The agreement marks the first time since 2008 that OPEC has agreed to curtail production and comes as a supply glut has weighed on prices. Oil prices spiked higher in response to the news on Wednesday and saw further upside today. Crude for January delivery jumped $1.62 to $51.06 a barrel after soaring $4.21 to $49.44 a barrel in the previous session.

Another batch of economic data was also released this morning, including a report from the Institute for Supply Management showing a faster rate of growth in manufacturing activity in the month of November.

The ISM said its purchasing managers index climbed to 53.2 in November from 51.9 in October, with a reading above 50 indicating growth in the manufacturing sector. Economists had expected the index to inch up to 52.3.

With the bigger than expected increase, the index reached its highest level since a matching reading in June. The index has not been higher since early 2015.

Meanwhile, a separate report from the Labor Department showed that initial jobless claims climbed by much more than expected to reach a five-month high in the week ended November 26th.

The report said initial jobless claims rose to 268,000, an increase of 17,000 from the previous week's unrevised level of 251,000. Economists had expected jobless claims to inch up to 253,000.

Friday morning, the Labor Department is scheduled to release its more closely watched monthly employment report for November.

Employment is expected to increase by 170,000 jobs in November after climbing by 161,000 jobs in October, while the unemployment rate is expected to hold at 4.9 percent.

Sector News

Semiconductor stocks showed a significant move to the downside on the day, dragging the Philadelphia Semiconductor Index down by 4.9 percent. The index pulled back further off the sixteen-year closing high it set last Friday.

Microchip Technology (MCHP), Analog Devices (ADI), and Lam Research (LRCX) turned in some of the semiconductor sector's worst performances.

Software, computer hardware, biotechnology, and internet stocks also saw substantial weakness, contributing to the steep drop by the Nasdaq.

Considerable weakness was also visible among telecom, commercial real estate, pharmaceutical, and housing stocks.

On the other hand, financial stocks added to yesterday's gains, with the Dow Jones Banks Index jumping by 2 percent and the NYSE Arca Broker/Dealer Index advancing by 1.5 percent.

Oil service stocks also saw some further upside amid the continued increase by the price of crude oil. The Philadelphia Oil Service Index surged up by 2 percent to a nearly six-month closing high.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved mostly higher during trading on Thursday. Japan's Nikkei 225 Index surged up by 1.1 percent, while Hong Kong's Hang Seng Index rose by 0.4 percent.

Meanwhile, the major European markets moved to the downside on the day. While the German DAX Index slumped by 1 percent, the U.K.'s FTSE 100 Index and the French CAC 40 Index fell by 0.5 percent and 0.4 percent, respectively.

In the bond market, treasuries moved notably lower, extending the pullback seen in the previous session. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, climbed 7.3 percent basis points to 2.441 percent.

Looking Ahead

Trading on Friday is likely to be driven by reaction to the Labor Department's closely watched monthly jobs report for November.

The data may not impact expectations regarding an interest rate hike by the Federal Reserve later this month, but James Smith, Developed Markets Economist at ING, said it could provide clues to the pace of hikes in 2017.