Stocks Close Mostly Lower Following Yellen Comments - U.S. Commentary

(RTTNews) - Stocks moved mostly lower over the course of the trading day on Wednesday, extending the sell-off that was seen in the previous session. With the continued pullback on the day, the Nasdaq and the S&P 500 fell to their worst closing levels in a month.

The major averages climbed well off their lows for the session going into the close but remained stuck in the red. The Dow fell 86.22 points or 0.5 percent to 17,841.98, the Nasdaq slid 19.68 points or 0.4 percent to 4,919.64 and the S&P 500 dropped 9.31 points or 0.5 percent to 2,080.15.

The weakness on Wall Street was partly in reaction to comments by Federal Reserve Chair Janet Yellen, who warned about high stock valuations.

"I would highlight that equity market valuations at this point generally are quite high," Yellen said during a discussion with International Monetary Fund Managing Director Christine Lagarde.

She added, "Now, they're not so high when you compare the returns on equities to the returns on safe assets like bonds, which are also very low, but there are potential dangers there."

Selling pressure among stocks was also generated by a continued increase in bond yields, which moved higher due in part to Yellen's prediction that yields would see a sharp jump when the Fed begins raising interest rates.

Meanwhile, traders were also reacting to a report from payroll processor ADP showing that private sector employment increased by much less than expected in the month of April.

ADP said employment in the private sector rose by 169,000 jobs in April compared to economist estimates for an increase of about 200,000 jobs.

The weaker than expected data may point to some downside risk for the Labor Department's monthly jobs report, which includes both private and public sector jobs.

The Labor Department report due on Friday is currently expected to show an increase of about 220,000 jobs in April compared to the increase of 126,000 jobs in March.

Despite the disappointing ADP data, Paul Ashworth, Chief U.S. Economist at Capital Economics, said most other labor market indicators suggest Friday's report will show much healthier job growth.

Sector News

After falling sharply in the previous session, electronic storage stocks showed another substantial move to the downside on the day. The NYSE Arca Disk Drive Index plunged by 3.4 percent to its lowest closing level in over six months.

DataLink (DTLK) and Imation (IMN) posted particularly steep losses within the storage sector after reporting disappointing first quarter results.

Significant weakness was also visible among gold stocks, as reflected by the 3 percent loss posted by the NYSE Arca Gold Bugs Index. The weakness in the sector came as gold for June delivery fell $2.90 to $1,190.80 an ounce.

Steel, software, and telecom stocks also saw notable weakness 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 lower on Wednesday, although the Japanese markets remained closed. China's Shanghai Composite Index slumped by 1.6 percent, while Australia's All Ordinaries Index plummeted by 2.2 percent.

Meanwhile, the major European markets closed modestly higher following a choppy trading session. While the U.K.'s FTSE 100 Index inched up by 0.1 percent, the French CAC 40 Index and the German DAX Index both rose by 0.2 percent.

In the bond market, treasuries extended the sell-off seen over the past two weeks, closing notably lower. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, advanced 6.4 basis points to a two-month closing high of 2.24 percent.

Looking Ahead

While the Labor Department's weekly jobless claims report may attract some attention on Thursday, trading activity may be somewhat subdued ahead of the release of the monthly jobs report on Friday.

On the earnings front, Tesla Motors (TSLA), MetLife (MET), Activision Blizzard (ATVI), and Whole Foods (WFM) are among the companies releasing their quarterly results after the close of today's trading.

Alibaba (BABA), Monster Worldwide (MWW), Priceline (PCLN), and SeaWorld Entertainment (SEAS) are also due to report their results before the start of trading on Thursday.