U.S. Stocks Close Notably Lower As Data Adds To Interest Rate Worries

(RTTNews) - Stocks saw significant weakness during trading on Thursday, extending the pullback seen during Wednesday's session. The major averages regained some ground after an early sell-off but remained notably lower.

After tumbling by more than 500 points in morning trading, the Dow ended the day down 366.38 points or 1.1 percent at 33,922.26. The Nasdaq slumped 112.61 points or 0.8 percent to 13,679.04 and the S&P 500 slid 35.23 points or 0.8 percent to 4,11.59.

With the extended pullback, the Nasdaq and S&P 500 continued to give back ground after inching up to their best closing levels in over a year on Monday.

The early sell-off on Wall Street came as a batch of largely upbeat U.S. economic data added to concerns about the outlook for interest rates following Wednesday's hawkish Federal Reserve minutes.

Before the start of trading, payroll processor ADP released a report showing much stronger than expected private sector job growth in the month of June.

ADP said private sector employment spiked by 497,000 jobs in June after jumping by a downwardly revised 267,000 jobs in May.

Economists had expected private sector employment to increase by 228,000 jobs compared to the addition of 278,000 jobs originally reported for the previous month.

While the surge in private sector employment paints a positive picture of the economy, continued strength in the labor market may convince the Fed to resume raising interest rates.

The Fed, which is due to announce its next interest rate decision later this month, has previously warned about the impact of labor market tightness.

The Institute for Supply Management also released a report showing the pace of growth in the service sector accelerated by much more than expected in June.

The ISM said its services PMI climbed to 53.9 in June from 50.3 in May, with a reading above 50 indicating growth in the sector. Economists had expected the index to inch up to 51.0.

Sector News

Airline stocks turned in some of the market's worst performances on the day, resulting in a 3.8 percent nosedive by the NYSE Arca Airline Index.

JetBlue (JBLU) posted a steep loss after saying it would follow a judge's order to end its partnership with American Airlines (AAL) in the Northeast in an effort to salvage its planned $3.8 billion acquisition of Spirit Airlines (SAVE).

Substantial weakness was also visible among oil stocks, as reflected by the 2.6 percent tumble by the NYSE Arca Oil Index. The weakness in the sector came even as the price of crude oil ended the day roughly flat.

Housing stocks also showed a significant move to the downside, with the Philadelphia Housing Sector Index plunging by 2.4 percent.

Gold, steel and banking also saw considerable weakness on the day, moving lower along with most of the other major sectors.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved mostly lower during trading on Thursday. Japan's Nikkei 225 Index slumped by 1.7 percent, while Hong Kong's Hang Seng Index plummeted by 3.0 percent.

The major European markets also showed significant moves to the downside on the day. While the French CAC 40 Index plunged by 3.1 percent, the German DAX Index dove by 2.6 percent and the U.K.'s FTSE 100 Index tumbled by 2.2 percent.

In the bond market, treasuries extended yesterday's sell-off following the upbeat U.S. economic data. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, spiked 9.6 basis points to 4.041 percent, closing above 4.0 percent for the first time in four months.

Looking Ahead

Trading on Friday is likely to be driven by reaction to the Labor Department's closely watched monthly jobs report, which could further impact the outlook for interest rates.