Stocks Close Firmly In The Red Following Volatile Session - U.S. Commentary

(RTTNews) - Stocks saw considerable volatility over the course of the trading session on Wednesday before ending the day in the red. With the lower close on the day, the Dow ended the session at its worst closing level in well over six months.

The major averages ended the day firmly in negative territory but well off their worst levels of the day. The Dow tumbled 162.61 points or 0.9 percent to 17,348.73, the Nasdaq fell 40.29 points or 0.8 percent to 5,019.05 and the S&P 500 slid 17.31 points or 0.8 percent to 2,079.61.

The volatility seen in afternoon trading came as traders reacted to the minutes of the Federal Reserve's latest monetary policy meeting.

The minutes, which were released ahead of schedule, revealed most participants believed conditions for raising interest rates were approaching but not yet achieved.

While meeting participants said the labor market had improved notably since early this year, many saw scope for some further improvement.

Some participants also expressed concerns about the outlook for inflation and whether it would support an interest rate hike.

Stocks initially moved higher in reaction to the minutes amid speculation that the Fed may delay its first rate hike rather than raising rates in September.

However, analysts subsequently said a September rate hike remains a distinct possibility, pointing to the assessment of many Fed members that labor market underutilization will largely be eliminated in the near term the economy evolves as expected.

Earlier in the day, the Labor Department released a report showing that U.S. consumer prices rose by slightly less than expected in July.

The Labor Department said its consumer price index edged up by 0.1 percent in July after climbing by 0.3 percent in June. Economists had expected prices to rise by 0.2 percent.

Excluding food and energy prices, the core consumer price index also ticked up by 0.1 percent in July following a 0.2 percent increase in June. Core prices were also expected to rise by 0.2 percent.

Sector News

Energy stocks saw substantial weakness on the day, contributing to the lower close by the broader markets. The weakness in the sector came as crude for September delivery tumbled $1.82 to a six-year closing low of $40.80 a barrel.

The sharp pullback by the price of crude oil came after a report from the Energy Information Administration said crude inventories unexpectedly jumped by 2.6 million barrels last week.

Reflecting the weakness in the energy sector, the Philadelphia Oil Service Index and the NYSE Arca Oil & Gas Index both plummeted by 3 percent.

Steel stocks also showed a significant move to the downside on the day, dragging the NYSE Arca Steel Index down by 2.7 percent. With the drop, the index fell to a six-year closing low.

Considerable weakness was also visible among computer hardware stocks, as reflected by the 1.8 percent drop by the NYSE Arca Computer Hardware Index. The index ended the session at its worst closing level in well over a year.

Biotechnology, chemical, and brokerage stocks also ended the day notably lower, while gold stocks spiked higher amid an increase by the price of the precious metal.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region turned in a mixed performance during trading on Wednesday. Japan's Nikkei 225 Index tumbled by 1.6 percent, while Australia's All Ordinaries Index jumped by 1.3 percent.

Meanwhile, the major European markets all came under pressure on the day. While the German DAX Index plummeted by 2.1 percent, the U.K.'s FTSE 100 Index and the French CAC 40 Index plunged by 1.9 percent and 1.8 percent, respectively.

In the bond market, treasuries turned higher as the day progressed and saw further upside following the Fed minutes. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, fell by 6.7 basis points to 2.129 percent.

Looking Ahead

Trading on Thursday may be impacted by reaction to a slew of U.S. economic data, including reports on weekly jobless claims, existing home sales, and Philadelphia-area manufacturing activity.