Stocks Remain Firmly Negative In Mid-Day Trading - U.S. Commentary

(RTTNews) - After falling sharply at the start of trading on Thursday, stocks have regained some ground but remain firmly in negative territory. Another sell-off by Chinese stocks is weighing on the markets, extending the downtrend seen this week.

The major averages have climbed off the three-month lows set in early trading but continue to post notable losses. The Dow is down 199.02 points or 1.2 percent at 16,707.49, the Nasdaq is down 77.35 points or 1.6 percent at 4,758.42 and the S&P 500 is down 24.38 points or 1.2 percent at 1,965.88.

The initial weakness on Wall Street came as Chinese stocks showed another substantial decrease, with the Shanghai Composite Index plunging by more than 7 percent in brief trading.

Chinese trading was halted for the second time this week after the sell-off, which came after the People's Bank of China set the yuan's daily reference rate at the lowest level since April of 2011.

The China Securities Regulatory Commission has subsequently suspended its circuit breaker system amid concerns the system is contributing to the recent volatility.

On the U.S. economic front, the Labor Department released a report before the start of trading showing a smaller than expected pullback in initial jobless claims in the week ended January 2nd.

The report said initial jobless claims fell to 277,000, a decrease of 10,000 from the previous week's unrevised level of 287,000. Economists had expected jobless claims to drop to 272,000.

Jobless claims fell less than expected but still pulled back off the nearly six-month high set in the previous week.

Friday morning, the Labor Department is scheduled to release its more closely watched monthly employment report.

Among individual stocks, shares of Finish Line (FINL) have moved sharply lower on the day after the athletic footwear and apparel retailer reported a wider than expected third quarter loss.

Home builder KB Home (KBH) has also come under pressure after reporting weaker than expected fourth quarter results.

Meanwhile, shares of Zumiez (ZUMZ) have shown a strong move to the upside after the action sports equipment retailer raised its fourth quarter guidance.

Sector News

Reflecting concerns about the outlook for Chinese demand, steel stocks continue to see substantial weakness in mid-day trading. The NYSE Arca Steel Index has plunged by 4.1 percent to a new record intraday low.

Brazil's CSN (SID), Allegheny Technologies (ATI), and Ryerson (RYI) are turning in some of the steel sector's worst performances.

Significant weakness also remains visible among airline stocks, as reflected by the 2.9 percent loss being posted by the NYSE Arca Airline Index. The index has fallen to its lowest intraday level in over four months.

Biotechnology, computer hardware, and brokerage stocks are also under pressure on the day, reflecting broad based weakness on Wall Street.

On the other hand, gold stocks are once again bucking the downtrend, resulting in a 2 percent gain by the NYSE Arca Gold Bugs Index. The strength in the sector comes as gold for February delivery is climbing $13.10 to $1,105 an ounce.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region saw substantial weakness during trading on Thursday. Japan's Nikkei 225 Index tumbled 2.3 percent, while Hong Kong's Hang Seng Index plummeted by 3.1 percent.

The major European markets also showed significant moves to the downside on the day. While the German DAX Index plunged by 2.3 percent, the U.K.'s FTSE 100 Index and the French CAC 40 Index slumped by 2 percent and 1.7 percent, respectively.

In the bond market, treasuries have climbed back near the unchanged line after seeing early weakness. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, is up by less than a basis point at 2.181 percent.