Stocks Close Sharply Lower, Dow Drops To Nearly Ten-Month Low - U.S. Commentary

(RTTNews) - Stocks moved sharply lower over the course of the trading day on Thursday, extending the downward move seen over the two previous sessions. With the sell-off, the Dow fell to its lowest closing level in nearly ten months.

The major averages saw further downside going into the close, ending the session at their worst levels of the day. The Dow plummeted 358.04 points or 2.1 percent to 16,990.69, the Nasdaq plunged 141.56 points or 2.8 percent to 4,877.49 and the S&P 500 tumbled 43.88 points or 2.1 percent to 2,035.73.

The steep losses on Wall Street partly reflected ongoing concerns about the situation in China on the heels of another volatile day in the Chinese stock market.

China's Shanghai Composite Index showed a substantial move back to the downside on the day, plummeting by 3.4 percent after jumping 1.2 percent on Wednesday.

Traders also seemed worried about the outlook for interest rates following the release of a batch of largely upbeat U.S. economic data.

The National Association of Realtors released a report this morning showing that existing home sales unexpectedly rose to their highest level in well over eight years in July.

NAR said existing home sales climbed 2.0 percent to an annual rate of 5.59 million in July from a downwardly revised 5.48 million in June.

The continued increase came as a surprise to economists, who had expected existing home sales to drop to a rate of 5.40 million from the 5.49 million originally reported for the previous week.

With the unexpected increase, existing home sales rose to their highest level since reaching 5.79 million in February of 2007.

The Philadelphia Federal Reserve also released a report showing a bigger than expected increase by its index of regional manufacturing activity.

Following yesterday's Fed minutes, the upbeat data added to recent speculation that the central bank will begin raising interest rates next month.

Sector News

Most of the major sectors showed notable moves to the downside on the day, reflecting broad based selling pressure on Wall Street.

Biotechnology stocks saw substantial weakness, dragging the NYSE Arca Biotechnology Index down by 4.6 percent. With the drop, the index ended the session at a three-month closing low.

Celldex Therapeutics (CLDX) and Agios Pharmaceuticals (AGIO) turned in two of the biotech sector's worst performances, tumbling by 10.7 percent and 10.2 percent, respectively.

Significant weakness was also visible among semiconductor, networking, and internet stocks, contributing to the steep drop by the tech-heavy Nasdaq.

Natural gas, airline, consumer discretionary and banking stocks also fell sharply, while gold stocks were among the few groups to buck the downtrend amid a sharp increase by the price of the precious metal.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved mostly lower during trading on Thursday. Japan's Nikkei 225 Index fell by 0.9 percent, while Hong Kong's Hang Seng Index tumbled by 1.8 percent.

The major European markets also moved to the downside on the day. While the U.K.'s FTSE 100 Index dropped by 0.6 percent, the French CAC 40 Index and the German DAX Index plummeted by 2.1 percent and 2.3 percent, respectively.

In the bond market, treasuries extended yesterday's rally amid the sell-off on Wall Street. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, slid 4.5 basis points to a three-month closing low of 2.084 percent.

Looking Ahead

Following the slew of economic data released this morning, the economic calendar for Friday is relatively quiet, potentially leading to choppy trading.

Trading may be impacted by reaction to earnings news from Hewlett-Packard (HPQ) and Gap (GPS), which are releasing their quarterly results after the close of today's trading.