Stocks Pull Back Sharply Ahead Of Monthly Jobs Report - U.S. Commentary

(RTTNews) - After seeing considerable volatility in early trading, stocks moved notably lower over the course of the trading day on Thursday. With the pullback on the day, the Dow and the S&P 500 fell to their lowest closing levels in nearly a month.

The major averages finished the session firmly in negative territory. The Dow tumbled 170.69 points or 0.9 percent to 17,905.58, the Nasdaq slid 40.11 points or 0.8 percent to 5,059.12 and the S&P 500 slumped 18.23 points or 0.9 percent to 2,095.84.

The volatility seen in early trading came as traders reacted to comments from the International Monetary Fund, which urged the Federal Reserve to delay raising interest rates until the first half of next year.

The IMF's call for delaying the first rate hike came as the lender lowered its forecast for U.S. economic growth this year to 2.5 percent from 3.1 percent.

Negative sentiment eventually prevailed, however, as traders continued to digest the recent sell-off by bonds, which fell sharply in the first three sessions this week.

The sharp pullback by bonds led to a subsequent jump in yields, with the ten-year yield soaring to its highest closing level since November of 2014 on Wednesday.

Traders also expressed renewed pessimism about the situation in Greece after yesterday's highly anticipated meeting between Greek and European officials once again ended in a stalemate.

The IMF announced this afternoon that the Greek government will bundle the four debt payments due to the lender in June into a single payment due at the end of the month.

Uncertainty ahead of the release of the Labor Department's closely watched monthly employment report on Friday also weighed on the markets.

The report is expected to show an increase of about 220,000 jobs in May, while the unemployment rate is expected to hold at 5.4 percent.

Before the start of trading, the Labor Department released a report showing a modest decrease in initial jobless claims in the week ended May 30th.

The report said initial jobless claims edged down to 276,000, a decrease of 8,000 from the previous week's revised level of 284,000. Economists had expected jobless claims to slip to 278,000.

Sector News

Computer hardware stocks showed a substantial move to the downside over the course of the session, dragging the NYSE Arca Computer Hardware Index down by 1.4 percent. The drop by the index came after it ended the previous session at a three-month closing high.

Western Digital (WDC), Seagate Technology (STX), and Lexmark (LXK) turned in some of the hardware sector's worst performances.

Significant weakness was also visible among steel stocks, as reflected by the 1.5 percent loss posted by the NYSE Arca Steel Index. A.M. Castle (CAS) and Posco (PKX) posted notable losses.

Chemical stocks also came under considerable selling pressure on the day, resulting in a 1.4 percent drop by the Dow Jones Chemicals Index. With the loss, the index moved toward the lower end of a recent trading range.

Energy, gold, and biotechnology stocks also saw notable weakness, moving lower along with most of the other major sectors.

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 inched up by 0.1 percent, while Hong Kong's Hang Seng Index fell by 0.4 percent.

Meanwhile, the major European markets all moved to the downside on the day. While the U.K.'s FTSE 100 Index tumbled by 1.3 percent, the French CAC 40 Index and the German DAX Index dropped by 0.9 percent and 0.7 percent, respectively.

In the bond market, treasuries regained ground after pulling back sharply over the three previous sessions. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, fell by 5.9 basis points to 2.307 percent.

Looking Ahead

The Labor Department's monthly jobs report is likely to move into the spotlight on Friday, with the data potentially having a significant impact on the outlook for interest rates.