Stocks Close Nearly Flat After Recovering From Early Weakness - U.S. Commentary

(RTTNews) - After coming under pressure in early trading, stocks staged a significant recovery over the course of the trading day on Thursday to end the day roughly flat. The major averages climbed well off their early lows, finishing the session just below the unchanged line.

While the Dow ended the session down 21.38 points or 0.1 percent to 16,846.13, the Nasdaq dipped 0.71 points or less than a tenth of a percent to 4,379.05 and the S&P 500 slipped 2.31 points or 0.1 percent to 1,957.22.

The early weakness on Wall Street was partly due to renewed concerns about the economic outlook following the release of a Commerce Department report showing weaker than expected personal spending growth in the month of May.

The Commerce Department said spending edged up by 0.2 percent in May after coming in unchanged in April, while economists had expected spending to increase by 0.4 percent.

The report also showed that real spending, which is adjusted to remove price changes, dipped by 0.1 percent in May following a 0.2 percent drop in April.

Following yesterday's report showing a sharp downward revision to the pace of consumer spending growth in the first quarter, the data raised some questions about the second quarter recovery.

Chris Low, chief economist at FTN Financial, said, "Unless June data are strong, we'll be lucky to hit 2% GDP in the second quarter."

"As a result, first half growth could be down and the year as a whole could be as weak as 1%," he added. "Growth that weak demands a rethink by the Fed and should have investors questioning the 6% year-to-date rise in stocks."

However, the concerns about the economy waned over the course of the session, as the spending data was thought of as an outlier amid mostly positive reports.

A separate report from the Labor Department showed that initial jobless claims edged down to 312,000 in the week ended June 21st, a decrease of 2,000 from the previous week's revised level of 314,000.

Peter Boockvar, managing director at the Lindsey Group, said the current level of claims is consistent with another increase of 200,000 jobs in June.

While comments from St. Louis Fed President James Bullard about interest rates rising sooner than anticipated were also cited as a reason for the early selling pressure, analysts noted that he has made similar comments in the past.

Sector News

Reflecting the recovery by the broader markets, most of the major sectors ended the day showing only modest moves after coming under pressure in early trading.

While some weakness remained visible among electronic storage and tobacco stocks, the NYSE Arca Disk Drive Index and the NYSE Arca Tobacco Index closed well off their worst levels of the day.

Meanwhile, gold, steel, and oil service stocks moved to the upside over the course of the session, contributing to the rebound.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved mostly higher on Thursday following the positive lead from Wall Street overnight. Japan's Nikkei 225 Index rose by 0.3 percent, while Hong Kong's Hang Seng Index jumped by 1.5 percent.

Meanwhile, the major European markets ended the day mixed. While the U.K.'s FTSE 100 Index closed just above the unchanged line, the French CAC 40 Index and the German DAX Index fell by 0.5 percent and 0.6 percent, respectively.

In the bond market, treasuries moved moderately higher, extending the upward trend seen over the past few days. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, fell by 3.4 basis points to 2.525 percent.

Looking Ahead

Following the slew of closely watched data released over the past few days, the economic calendar is relatively quiet on Friday.

Nonetheless, trading could be impacted by the release of a revised report from Thomson Reuters and the University of Michigan on consumer sentiment in the month of June.

On the earnings front, athletic apparel giant Nike (NKE) is releasing its quarterly results after the close of today's trading.