News Column

Stocks Come Under Pressure, Extending Yesterday's Sell-Off - US Commentary

August 1, 2014

WASHINGTON (Alliance News) - After initially showing a lack of direction, stocks have moved notably lower over the course of the trading day on Friday. The pullback on the day is extending the sharp drop seen in the previous session, with the Dow and the S&P 500 falling to two-month lows.

The major averages have climbed off their worst levels in recent trading but remain firmly negative. The Dow is down 100.56 points or 0.6% at 16,462.74, the Nasdaq is down 38.07 points or 0.9% at 4,331.70 and the S&P 500 is down 11.33 points or 0.6% at 1,919.34.

The weakness that has emerged on Wall Street comes following the release of a slew of US economic data, including the Labor Department's closely watched monthly jobs report.

The Labor Department said employment rose by 209,000 jobs in July after jumping by an upwardly revised 298,000 in June, while economists had expected an increase of 233,000 jobs.

Despite the continued job growth, the Labor Department also said the unemployment rate unexpectedly edged up to 6.2% in July from a nearly six-year low of 6.1% in June.

The report also showed only a modest uptick in average hourly earnings, easing some of the recent concerns about the outlook for interest rates.

However, a separate report from the Institute for Supply Management showed that activity in the manufacturing sector expanded at a notably faster rate in the month of July.

The ISM said its purchasing managers index climbed to 57.1 in July from 55.3 in June, with a reading above 50 indicating growth in the manufacturing sector. Economists had been expecting the index to edge up to a reading of 56.0.

With the bigger than expected increase, the manufacturing index came in just above last November's reading of 57.0 and hit its highest level since reaching 58.9 in April of 2011.

Peter Boockvar, chief market analyst at the Lindsey Group, said, "From the Fed's perspective on today's data, they got a temporary respite from the 'behind the curve' crowd after the payroll data, but the ISM is further evidence that this respite will be temporary."

Traders are also digesting reports on personal income and spending, consumer sentiment, and construction spending while also keeping an eye on developments overseas.

Sector News

After helping to lead the markets lower in the previous session, networking stocks are showing another notable move to the downside. The NYSE Arca Networking Index has tumbled by 2.1%, falling to its lowest intraday level in well over two months.

Within the networking sector, Arris Group (ARRS) has plunged by 13.7% despite reporting better than expected second quarter results and providing upbeat guidance.

Computer hardware stocks are also adding to yesterday's steep losses, with the NYSE Arca Computer Hardware Index falling by 1.8%. The index is pulling back further off the record closing high it set on Wednesday.

Significant weakness has also emerged among banking stocks, as reflected by the 1.8% loss being posted by the Dow Jones Banks Index. JP Morgan (JPM) is turning in one of the sector's worst performances, falling by 2.8%.

Brokerage, energy, software, and telecom stocks have also come under pressure on the day, extending the broad based weakness seen on Thursday.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region came under pressure following the overnight sell-off on Wall Street. Japan'sNikkei 225 Index. Japan'sNikki 225 Index fell by 0.6%, while Hong Kong'sHang Seng Index dropped by 0.9%.

The major European markets also moved to the downside on the day. While the German DAX Index plunged by 2.1%, the French CAC 40 Index tumbled by 1% and the UK'sFTSE 100 Index slid by 0.8%.

In the bond market, treasuries have moved notably higher amid the continued weakness on Wall Street. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, is down by 5.4 basis points at 2.502%.

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Source: Alliance News

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