Stocks Show Another Steep Drop At The Start Of Trading - U.S. Commentary

(RTTNews) - On the heels of another Chinese sell-off, U.S. stocks once again showed a significant move to the downside at the start of trading on Thursday. The steep drop seen at the open dragged the major averages down to their lowest intraday levels in three months.

The major averages have climbed off their lows for the session since then but remain firmly in the red. The Dow is down 135.02 points or 0.8 percent at 16,771.49, the Nasdaq is down 64.78 points or 1.3 percent at 4,770.99 and the S&P 500 is down 18.46 points or 0.9 percent at 1,971.80.

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.

Reflecting concerns about Chinese demand, steel stocks are seeing considerable weakness on the day. The NYSE Arca Steel Index has plummeted by 3.3 percent to a new record intraday low.

Airline stocks have also shown a particularly steep drop in early trading, dragging the NYSE Arca Airline Index down by 2.8 percent. Republic Airways (RJET) is leading the sector lower, extending a recent downtrend.

Computer hardware, railroad, and telecom stocks are also seeing early weakness, while gold stocks are once again bucking the downtrend amid an increase by the price of the precious metal.

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.

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.

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 have also shown significant moves to the downside on the day. While the German DAX Index has plunged by 2.3 percent, the U.K.'s FTSE 100 Index and the French CAC 40 Index are down by 1.9 percent and 1.7 percent, respectively.

In the bond market, treasuries have pulled back slightly after moving notably higher over the past few sessions. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, is up by 1.4 basis points at 2.191 percent.