Profit Taking Contributes To Notable Pullback On Wall Street - U.S. Commentary

(RTTNews) - After ending the previous session modestly higher, stocks showed a notable move back to the downside during trading on Wednesday. With the drop on the day, the tech-heavy Nasdaq pulled back off yesterday's record closing high.

The major averages closed firmly in negative territory, just off their worst levels of the day. The Dow fell 111.36 points or 0.6 percent to 19,833.68, the Nasdaq tumbled 48.89 points or 0.9 percent to 5,438.56 and the S&P 500 slid 18.96 points or 0.8 percent to 2,249.92.

Profit taking contributed to the weakness on Wall Street, as some traders looked to cash in on the recent strength in the markets.

Negative sentiment was also generated by a report from the National Association of Realtors unexpectedly showing a sharp pullback in U.S. pending home sales in the month of November.

NAR said its pending home sales index tumbled by 2.5 percent to 107.3 in November after inching up by 0.1 percent to a revised 110.0 in October.

A pending home sale is one in which a contract was signed but not yet closed. Normally, it takes four to six weeks to close a contracted sale.

The steep drop in pending home sales came as a surprise to economists, who had expected pending sales to climb by 0.5 percent.

With the unexpected decrease, the pending home sales index plunged to its lowest level since hitting 105.4 in January.

Nonetheless, trading activity remained subdued, with some traders still away from their desks following Christmas and ahead of another three-day weekend for New Year's Day.

Sector News

After rising sharply over the past month, semiconductor stocks saw a significant pullback on the day. The Philadelphia Semiconductor Index slumped by 1.9 percent after ending the previous session at its highest closing level in sixteen years.

Graphics chip maker Nvidia (NVDA) led the sector back to the downside, plunging 6.9 percent from the record closing high set on Tuesday.

Considerable weakness was also visible among oil service stocks, as reflected by the 1.7 percent loss posted by the Philadelphia Oil Service Index. The weakness in the sector came despite a modest increase by the price of crude oil.

Natural gas, biotechnology, brokerage and telecom stocks also saw notable weakness, moving lower along with most of the other major sectors.

Meanwhile, gold stocks were among the few groups to buck the downtrend, resulting in a 2.4 percent jump by the NYSE Arca Gold Bugs Index. The strength among gold stocks came as gold for February delivery rose $2.10 to $1,140.90 an ounce.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region turned in a mixed performance on Wednesday. Japan's Nikkei 225 Index closed just below the unchanged line and China's Shanghai Composite Index fell by 0.4 percent, while Hong Kong's Hang Seng Index advanced by 0.8 percent.

The major European markets largely showed a lack of direction on the day. While the U.K.'s FTSE 100 Index climbed by 0.5 percent, the German DAX Index and the French CAC 40 Index both ended the day nearly unchanged.

In the bond market, treasuries moved notably higher following the pullback seen in the previous session. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, dropped by 5.7 basis points to 2.506 percent.

Looking Ahead

Trading on Thursday may be impacted by reaction to the weekly jobless claims report, with jobless claims expected to pull back to 262,000 in the week ended December 24th after jumping to a six-month high of 275,000 in the previous week.