Stocks Bounce Well Off Worst Levels Before Closing Mixed - U.S. Commentary

(RTTNews) - After falling sharply early in the session, stocks showed a substantial rebound over the course of the trading day on Thursday. The major averages bounced well off their worst levels of the day, with the tech-heavy Nasdaq climbing into positive territory.

The Dow fell by nearly 800 points to its lowest intraday level in over a month but ended the day down by just 79.40 points or 0.3 percent at 24,947.67. The S&P 500 edged down 4.11 points or 0.2 percent to 2,695.95, while the Nasdaq rose 29.83 points or 0.4 percent to 7,188.26.

The rebound on Wall Street was partly attributed to a report from the Wall Street Journal indicating Federal Reserve officials are considering signaling a "wait-and-see mentality" after a likely interest rate hike later this month.

Citing recent interviews and public statements, the Journal said Fed officials still think interest will move broadly higher in 2019, but they are reportedly becoming "less sure how fast they will need to act or how far they will need to go."

Traders also went bargain hunting following the early sell-off driven by skepticism about the potential for a long-term trade agreement between the U.S. and China after the arrest of a top executive at Chinese tech giant Huawei.

Huawei CFO Meng Wanzhou was arrested in Canada on suspicion of violating U.S. trade sanctions against Iran and faces possible extradition to the U.S.

The development added to uncertainty about whether the 90-day trade truce negotiated by President Donald Trump and Chinese President Xi Jinping will give the two sides enough time to reach a long-term deal.

Traders were also reacting to a slew of U.S. economic data, as several reports originally due to be released on Wednesday were postponed due to former President George H.W. Bush's funeral.

Payroll processor ADP released a report showing private sector employment increased by less than expected in the month of November.

ADP said private sector employment climbed by 179,000 jobs in November after jumping by a downwardly revised 225,000 jobs in October.

Economists had expected an increase of about 195,000 jobs compared to the addition of 227,000 jobs originally reported for the previous month.

"Job growth is strong, but has likely peaked," said Mark Zandi, chief economist of Moody's Analytics. "This month's report is free of significant weather effects and suggests slowing underlying job creation."

He added, "With very tight labor markets, and record unfilled positions, businesses will have an increasingly tough time adding to payrolls."

A separate report from the Labor Department showed first-time claims for U.S. unemployment benefits edged down by less than expected in the week ended December 1st.

The report said initial jobless claims slipped to 231,000, a decrease of 4,000 from the previous week's revised level of 235,000. Economists had expected jobless claims to dip to 225,000.

The Commerce Department also released a report showing the U.S. trade deficit widened to its highest level in ten years in the month of October.

The report said the trade deficit widened to $55.5 billion in October from a revised $54.6 billion in September. Economists had expected the trade deficit to widen to $55.0 billion.

Meanwhile, a report from the Institute for Supply Management unexpectedly showed an acceleration in the pace of growth in service sector activity in the month of November.

The ISM said its non-manufacturing index crept up to 60.7 in November after pulling back to 60.3 in October, with a reading above 50 indicating service sector growth. Economists had expected the index to dip to 59.2.

"The non-manufacturing sector continued to reflect strong growth in November," said Anthony Nieves, Chair of the ISM Non-Manufacturing Business Survey Committee. "However, concerns persist about employment resources and the impact of tariffs."

Sector News

Despite the rebound by the broader markets, energy stocks still ended the day significantly lower amid a steep drop by the price of crude oil.

Crude for January delivery tumbled $1.40 to $51.49 a barrel, as OPEC reportedly agreed to reduce production but delayed an official announcement of how much it would cut.

Reflecting the weakness in the energy sector, the Philadelphia Semiconductor Index plunged by 4.4 percent, the NYSE Arca Natural Gas Index tumbled by 2.4 percent and the NYSE Arca Oil Index slumped by 1.7 percent.

Considerable weakness also remained visible among banking stocks, as reflected by the 1.6 percent drop by the KBW Bank Index. The index ended the session at its lowest closing level in over a month.

Steel and chemical stocks also climbed well off their worst levels of the session but still ended the day firmly in negative territory.

On the other hand, interest rate sensitive commercial real estate and housing stocks showed strong moves to the upside, driving the Dow Jones Real Estate Index and the Philadelphia Housing Sector Index up by 2.5 percent and 2.4 percent, respectively.

Significant strength also emerged among networking stocks, resulting in a 1.4 percent advance by the NYSE Arca Networking Index.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved sharply lower during trading on Thursday. Japan's Nikkei 225 Index plummeted by 1.9 percent, while Hong Kong's Hang Seng Index nosedived by 2.5 percent.

The major European markets also showed substantial moves to the downside on the day. While the German DAX Index plunged by 3.5 percent, the French CAC 40 Index and the U.K.'s FTSE 100 Index tumbled by 3.3 percent and 3.2 percent, respectively.

In the bond market, treasuries pulled back well off their highs of the session but remained firmly positive. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, fell by 4.8 basis points to 2.876 percent.

Looking Ahead

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

Employment is expected to increase by 205,000 jobs in November after jumping by 250,000 jobs in October, while the unemployment rate is expected to hold at 3.7 percent.

The jobs data is likely to overshadow separate reports on consumer sentiment, wholesale inventories, and consumer credit.