Stocks Close Lower Once Again In Reaction To Earnings News - U.S. Commentary

(RTTNews) - Stocks came under pressure over the course of the trading day on Thursday after initially showing a lack of direction. With the notable pullback on the day, the major averages closed lower for the third consecutive session.

The major averages climbed off their worst levels going into the close but remained firmly negative. The Dow fell 119.09 points or 0.7 percent to 17,731.95, the Nasdaq slid 25.36 points or 0.5 percent to 5,146.41 and the S&P 500 dropped 12.00 points or 0.6 percent to 2,102.15.

The weakness that emerged on Wall Street largely reflected another negative reaction to the latest batch of earnings news.

Shares of Qualcomm (COM) moved sharply lower on the day after the mobile chip maker reported better than expected third quarter earnings but provided weak guidance for the current quarter and slashed its outlook for the full year.

Credit card giant American Express (AXP) also moved to the downside after reporting second quarter earnings that exceeded estimates but on revenues that came in below forecasts.

Dow components Caterpillar (CAT) and 3M (MMM) also saw significant weakness after providing disappointing guidance.

On the other hand, General Motors (GM) posted a strong gain after reporting better than expected second quarter earnings. The auto giant also said its second half will be even better than the first.

Memory chip maker SanDisk (SNDK) also moved notably higher after reporting second quarter results that exceeded analyst estimates.

In economic news, the Labor Department released a report before the start of trading showing first-time claims for U.S. unemployment benefits tumbled to their lowest level in over forty years in the week ended July 18th.

The report said initial jobless claims dropped to 255,000, a decrease of 26,000 from the previous week's unrevised level of 281,000. Economists had expected jobless claims to edge down to 279,000.

With the much bigger than expected decrease, jobless claims fell to their lowest level since hitting 233,000 in November of 1973.

Separately, the Conference Board said its index of leading U.S. economic indicators rose more than expected in June, pointing to continued strength in the economic outlook for the remainder of the year.

Sector News

Gold stocks moved sharply lower over the course of the trading day on Thursday, dragging the NYSE Arca Gold Bugs Index down by 4.3 percent. With the steep drop on the day, the index fell to its lowest closing level in well over twelve years.

The sell-off by gold stocks came even though the price of the precious metal moved modestly higher, with gold for August delivery climbing $2.60 to $1,094.10 an ounce.

Substantial weakness was also visible among railroad stocks, as reflected by the 4.3 percent loss posted by the Dow Jones Railroads Index. The drop pulled the index down to its lowest closing level in well over a year.

Union Pacific (UNP) helped to lead the railroad sector lower, falling by 5.7 percent after reporting weaker than expected second quarter revenues.

Telecom stocks also saw significant weakness, resulting in a 2.2 percent drop by the NYSE Arca Telecom Index. Windstream Holdings (WIN) and Sprint (S) posted steep losses.

Trucking, utilities, and commercial real estate stocks also came under pressure on the day, contributing to the pullback by the broader markets.

On the other hand, oil service stocks moved sharply higher as the day progressed, driving the Philadelphia Oil Service Index up by 2.8 percent. The strength in the sector came despite a continued decrease by the price of crude oil.

Networking, semiconductor, and computer hardware stocks also saw some strength, reflecting a rebound by the tech sector following yesterday's sell-off.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region turned in a mixed performance during trading on Thursday. Japan's Nikkei 225 Index rose by 0.4 percent, while Australia's All Ordinaries Index fell by 0.4 percent.

The major European indexes also ended the day on opposite sides of the unchanged line. While the French CAC 40 Index inched up by 0.1 percent, the German DAX Index and the U.K.'s FTSE 100 Index edged down by 0.1 percent and 0.2 percent, respectively.

In the bond market, treasuries moved notably higher over the course of the trading session. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, dropped 4.5 basis points to 2.277 percent.

Looking Ahead

Earnings news is likely to remain in focus on Friday, with Amazon (AMZN), AT&T (T), Starbucks (SBUX) and Visa (V) releasing their quarterly results after the close of today's trading.

American Airlines (AAL), Biogen (BIIB), and Xerox (XRX) are also among the companies due to report their results before the start of trading on Friday.

Traders are also likely to keep an eye on the release of the Commerce Department's report on new home sales in the month of June.