Stocks Fall Sharply On Concerns About Developments Overseas - U.S. Commentary

(RTTNews) - After seeing a significant rebound over the course of the previous session, stocks showed a substantial move back to the downside on Wednesday. The pullback dragged the Dow down to a five-month closing low, while the S&P 500 and the Nasdaq closed at their worst levels since March and April, respectively.

The major averages ended the session sharply lower, not far off their worst levels of the day. The Dow tumbled 261.49 points or 1.5 percent to 17,515.42, the Nasdaq plunged 87.70 points or 1.8 percent to 4,909.76 and the S&P 500 plummeted 34.65 points or 1.7 percent to 2,046.69.

The sell-off on Wall Street came as Chinese stocks extended their recent steep decline, with the benchmark Shanghai Composite Index plummeting 5.9 percent to a four-month low despite a series of market-stabilizing measures by authorities.

Almost half of China's roughly 2,800 listed firms announced trading halts as increasing signs of deleveraging drove down stocks across the board. There were fears that a prolonged slump would cause systematic risk for the country's financial system.

Traders also kept an eye on the latest developments regarding the Greek debt crisis after European leaders set Sunday as the final deadline for Greece to reach an agreement on a new bailout.

At a press conference, European Council President Donald Tusk said, "The situation is really critical and unfortunately we can't exclude a black scenario if there is no agreement by Sunday."

"Until now I have avoided talking about deadlines, but tonight I have to say it loud and clear that the final deadline ends this week," he added.

Greek Prime Minister Alexis Tsipras failed to present a detailed reform blueprint at a meeting of finance ministers on Tuesday. The Greek government now has until Thursday to submit a plan.

Some additional negative sentiment was generated by news that the New York Stock Exchange temporarily suspended trading in all symbols.

The NYSE stressed the suspension was due to an internal technical issue and was not the result of a cyber breach. Trading resumed late in the session after more than three and a half hours.

Sector News

Steel stocks saw substantial weakness throughout the session, reflecting concerns about the outlook for global demand. The NYSE Arca Steel Index subsequently tumbled by 4 percent to a new six-year closing low.

Mechel (MTL), Cliffs Natural Resources (CLF), and AK Steel (AKS) turned in some of the steel sector's worst performances.

Significant weakness also emerged among biotechnology stocks, as reflected by the 2.9 percent loss posted by the NYSE Arca Biotechnology Index. Celldex Therapeutics (CLDX) and Nektar Therapeutics (NKTR) posted notable losses.

Oil service stocks also saw considerable weakness on the day, dragging the Philadelphia Oil Service Index down by 2.9 percent. The weakness in the sector came as crude for August delivery fell $0.68 to $51.65 a barrel.

Semiconductor, brokerage, electronic storage, and natural gas stocks also moved notably lower, reflecting broad based selling pressure on Wall Street.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved sharply lower along with the Chinese market. Japan's Nikkei 225 Index tumbled by 3.1 percent, while Hong Kong's Hang Seng Index plunged by 5.8 percent.

Meanwhile, the major European markets moved to the upside on the day. While the U.K.'s FTSE 100 Index advanced by 0.9 percent, the French CAC 40 Index and the German DAX Index climbed 0.8 percent and 0.7 percent, respectively.

In the bond market, treasuries moved to the upside going into the close after showing a lack of direction for much of the session. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, fell by 2.5 basis points to 2.206 percent.

Looking Ahead

A report on weekly jobless claims may attract some attention on Thursday, although traders are also likely to keep an eye on developments overseas.

Additionally, Alcoa (AA) is due to reports its second quarter results after the close of today's trading, marking the unofficial start of earnings season.