A trader looks at his screen on the floor of the New York Stock Exchange June 29, 2010. Investors fled the U.S. stock market on Tuesday and the S&P 500 tumbled to its lowest level in eight months in a sell-off triggered by a wave of increasing alarm over the global economic outlook. REUTERS/Brendan McDermid (UNITED STATES - Tags: BUSINESS)

A trader looks at his screen on the floor of the New York Stock Exchange June 29, 2010. Investors fled the U.S. stock market on Tuesday and the S&P 500 tumbled to its lowest level in eight months in a sell-off triggered by a wave of increasing alarm ... over the global economic outlook. REUTERS/Brendan McDermid (UNITED STATES - Tags: BUSINESS) (Reuters)

Wall Street Sheds Big Gains, Dips Into the Red

By Markets FOXBusiness

FOX Business: The Power to Prosper

Continue Reading Below

The Dow shed 250 point gains and fell modestly lower, while the Nasdaq sunk deep into the red, as consumer-discretionary, materials and Internet shares were pummeled. 

Today's Markets

As of 3:05 p.m. ET, the Dow Jones Industrial Average fell 42 points, or 0.39%, to 10,968, the S&P 500 slipped 11 points, or 0.95%, to 1,140 and the Nasdaq Composite dipped 53.9 points, or 2.1%, to 2,439. 

Financials and utilities were the only major sectors in the green, with JPMorgan Chase (JPM) and Bank of America (BAC) leading the blue chips higher and Consolidated Edison (ED) rising.  However consumer-discretionary shares like Tiffany (TIF) and Coach (COH) dragged and materials stocks like Alcoa (AA) struggled. 

More On This...

Additionally, many high-profile technology companies saw substantial selling pressure.  Netflix (NFLX) led the Nasdaq 100 to the downside with a more than 10% loss, while Internet players like Expedia (EXPE), Priceline (PCLN) and Yahoo! (YHOO) sustained bigger than 5% declines.

Continue Reading Below

The growing tensions were visible in bond markets: the yield on the benchmark 10-year Treasury note had rallied above 2%, but has since falling to 1.969% -- below its last closing level of 1.98%. Volatility, as measured by the VIX, which had been far to the downside, edged slightly higher in mid-day trading. 

The final reading of U.S. Gross Domestic Product showed the economy expanded at an annualized pace of 1.3% in the second quarter, better than the previous estimate of 1%, and slightly topping estimates of 1.2%.  The economy has slowed down significantly amid continued weakness in many sectors.  Food and energy prices have climbed considerably from last year, putting added strain on consumers.  Additionally, a stalling labor market, and turmoil on Wall Street have weighed heavily on confidence, also pushing back demand. 

Weekly jobless claims fell to 391,000 from 428,000 the prior week, much lower than the 420,000 economists forecast. First time claims for unemployment benefits have been hovering about the 400,000-level for weeks in yet another sign that the labor market is struggling to find its footing. 

Indeed, an important caveat to the relatively positive weekly data is the the Labor Department says "“technical issues and seasonal adjustment volatility” and not economic factors led to the sudden downtick. 

"While the market responded well to the initial claims print, the ... caveat shouldn't be ignored," Peter Bookvar, managing director at Miller Tabak + Co., wrote in a note to clients. 

Still, other analysts struck a more upbeat tone: "These are factors that are always part of the normal seasonal adjustment process, and there is nothing in this statement to suggest that this week's decline is distorted," economists at Barclays Capital wrote in a research note. 

Pending home sales fell 1.2% in August from July, well better than the 1.8% drop economists anticipated.  On a year-to-year basis pending sales, which measures signed contracts, have leaped 7.7%.  

Wall Street has been driven by headlines regarding Europe's sovereign debt crisis, which has raised the specter of a Greek default that could put the world's financial system, and the European Union, in peril.  Indeed, worries that German Chancellor Angela Merkel may not be able to rally enough support to back additional rescue funds for Greece contributed to the steep selloff the markets sustained late Thursday. 

However, Germany's lower house, called the Bundestag, approved new powers for the European Financial Stability Facility, Europe's rescue facility early on Thursday.  The move by Europe's largest economic power helped to allay fears that political tensions would hamper relief efforts for Greece, that will likely need to default if it doesn't receive billions of euros in international aid. 

Commodities markets across the board were the subject of intense selling Wednesday amid fears the slowing economy may paralyze demand for energy and materials.  Indeed, copper a key industrial metal, plunged more than 5% to a 52-week low, while crude oil slid 3.8%.  Precious metals like gold and silver fared slightly better. 

Trading in futures markets was more tame on Thursday.  Light, sweet crude rose $1.42, or 1.8%, to $82.65 a barrel.  Wholesale RBOB gasoline fell 1 cent, or 0.53%, to $2.64 a gallon. 

In metals, gold fell 50 cents, or 0.02%, to $1,617 a troy ounce. Copper fell 1 cent, or 0.36%, to $3.24 a pound. 

The euro jumped 0.32% against the U.S. dollar, while the greenback fell 0.62% against a basket of world currencies. 

Corporate News

Advanced Micro Devices (AMD) cut down its third-quarter revenue and gross margin forecast, sending shares sinking. 

Foreign Markets

The Euro Stoxx 50 rose 1.6% to 2,212, the English FTSE 100 fell 0.4% to 5,197 and the German DAX climbed 1.1% to 5,640. 

In Asia, the Japanese Nikkei 225 jumped 0.99% to 8,701 and the Chinese Hang Seng dipped 0.66% to 18,011. 

 

What do you think?

Click the button below to comment on this article.