Stocks Extend Downward Move On Disappointing Retail Sales - U.S. Commentary

(RTTNews) - Stocks saw notable weakness during trading on Wednesday, extending the downward move seen over the past few sessions. After showing a substantial move to the downside, the major averages regained some ground but still closed firmly in the red.

While the Dow recovered after falling nearly 350 points, the blue chip index still ended the day down 189.59 points or 1.1 percent at 17,427.09. The tech-heavy Nasdaq also fell 22.18 points or 0.5 percent to 4,639.32, while the S&P 500 slid 11.76 points or 0.6 percent to 2,011.27.

The weakness on Wall Street came following the release of a report from the Commerce Department showing a much steeper than expected drop in retail sales in the month of December.

The Commerce Department said retail sales slumped by 0.9 percent in December, while economists had expected sales to edge down by just 0.1 percent.

The bigger than expected drop in sales was due in large part to lower gasoline prices, although the report still raised concerns that the U.S. economy could succumb to the slowdown overseas.

Rob Carnell, chief international economist at ING, said, "With the U.S. about the only beacon of growth globally, if even this engine is spluttering, then a more substantial market correction than we have already seen may well be on the cards."

The release of the disappointing retail sales data came on the heels of news that the World Bank cut its forecast for global GDP growth in 2015.

Selling pressure was also generated in reaction to disappointing quarterly results from JP Morgan (JPM), with shares of the financial giant falling by 3.5 percent.

Before the start of trading, JP Morgan reported fourth quarter earnings that came in below analyst estimates due in part to higher than expected legal expenses.

Nonetheless, stocks managed to regain some ground in afternoon trading amid a jump in crude oil prices and the release of the Federal Reserve's Beige Book report.

The Beige Book said most Fed districts reported "modest" or "moderate" economic growth in the period from mid-November through late December.

Sector News

While most of the major sectors ended the session well off the worst levels of the day, substantial weakness remained visible among steel stocks. The NYSE Arca Steel Index plunged by 3 percent to its lowest closing level in almost six years.

Allegheny Technologies (ATI) and Universal Stainless (USAP) turned in two of the steel sector's worst performances amid concerns about the outlook for global demand.

Financial stocks also ended the day notably lower following the disappointing quarterly results from JP Morgan (JPM). Reflecting the weakness in the sector, the Dow Jones Banks Index and the NYSE Arca Broker/Dealer Index both tumbled by 2.1 percent.

Significant weakness also remained visible among gold stocks, as reflected by the 1.7 percent loss posted by the NYSE Arca Gold Bugs Index. The weakness in the sector came even though the price of the precious metal closed nearly flat.

Airline, trucking, and computer hardware stocks also saw some weakness on the day, while notable strength emerged among natural gas and utilities stocks.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved mostly lower during trading on Wednesday. Japan's Nikkei 225 Index tumbled by 1.7 percent, while Hong Kong's Hang Seng Index fell by 0.4 percent.

The major European markets also saw significant weakness on the day. While the U.K.'s FTSE 100 Index plummeted 2.4 percent, the French CAC 40 Index and the German DAX Index slumped by 1.6 percent and 1.3 percent, respectively.

In the bond market, treasuries moved notably higher on the heels of the disappointing retail sales data. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, slid 5.3 basis points to 1.837 percent.

Looking Ahead

Trading on Thursday could be impacted by another batch of U.S. economic data, including reports on weekly jobless claims, producer prices, and regional manufacturing activity.

On the earnings front, financial giants Bank of America (BAC) and Citigroup (C) are among the companies due to report their quarterly results before the start of trading on Thursday.