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Wall Street closed out yet another tumultuous trading session split down the middle: financials and utilities posted big gains, but consumer-driven stocks and big-name Internet firms sustained strong selling pressure.
The blue chips were up by 260 points early in the trading day, and fell as much as 45 points. Other major market averages followed along the same lines, falling and rising in wide ranges.
Financials, utilities and industrials were the top performers, with Bank of America (NYSE:BAC) leading the blue chips higher and Consolidated Edison (NYSE:ED) and General Electric (NYSE:GE) rising. However consumer-discretionary shares like Tiffany (NYSE:TIF) and Coach (NYSE:COH) dragged and materials stocks like The Mosaic Company (NYSE:MOS) struggled.
Additionally, many high-profile technology companies saw substantial selling pressure. Netflix (NASDAQ:NFLX) led the Nasdaq 100 to the downside with a more than 10% loss, while Internet players like Expedia (NASDAQ:EXPE), Priceline (NASDAQ:PCLN) and Yahoo! (NASDAQ:YHOO) sustained bigger than 5% declines.
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.
Rare Upbeat Data
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%.
Euro Tensions Ease, But Crisis Still Looms
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 93 cents, or 1.2%, to $82.14 a barrel. Wholesale RBOB gasoline fell 3 cents, or 1.2%, to $2.62 a gallon.
In metals, gold fell 80 cents, or 0.05%, to $1,617 a troy ounce. Copper fell less than a penny to $3.24 a pound.
The euro jumped 0.4% against the U.S. dollar, while the greenback fell 0.62% against a basket of world currencies.
Advanced Micro Devices (NYSE:AMD) cut down its third-quarter revenue and gross margin forecast, sending shares sinking.
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.