After extending yesterday’s rally early in the session, stocks moved sharply lower over the coursed the trading day on Thursday. The major averages all showed substantial moves to the downside.

The tech-heavy Nasdaq plunged 405.25 points or 2.3 percent to 17,194.15, the S&P 500 (SPI:SP500) tumbled 75.62 points or 1.4 percent to 5,446.68 and the Dow slumped 494.82 points or 1,2 percent to 40,347,97

The sell-off on Wall Street comes as some disappointing data led to concerns about the outlook for the U.S. economy, offsetting optimism about a near-term interest rate cut by Federal Reserve.

The Institute for Supply Management released a report showing U.S. manufacturing activity unexpectedly contracted at an accelerated rate in the month of July.

The ISM said its manufacturing PMI fell to 46.8 in July from 48.5 in June, with a reading below 50 indicating contraction. Economists had expected the index to inch up to 48.8 percent.

With the bigger than expected decrease, the manufacturing PMI dropped to its lowest level since hitting 46.6 in November 2023.

“Demand remains subdued, as companies show an unwillingness to invest in capital and inventory due to current federal monetary policy and other conditions,” said Timothy R. Fiore, Chair of the ISM Manufacturing Business Survey Committee.

He added, “Production execution was down compared to June, likely adding to revenue declines, putting additional pressure on profitability.”

The Labor Department also released a report showing first-time claims for U.S. unemployment benefits rose to their highest level in almost a year in the week ended July 27th.

The report said initial jobless claims climbed to 249,000, an increase of 14,000 from the previous week’s unrevised level of 235,000. Economists had expected jobless claims to inch up to 236,000.

With the bigger than expected increase, jobless claims reached their highest level since hitting 258,000 in the week ended August 5, 2023.

Early in the session, stocks benefited from a positive reaction to upbeat earnings news from Facebook parent Meta Platforms (NASDAQ:META).

Sector News

Semiconductor stocks saw a substantial pullback following the rally seen in the previous session, with the Philadelphia Semiconductor Index plunging by 7.1 percent.

Airline stocks also showed a significant move to the downside, dragging the NYSE Arca Airline Index down by 5.6 percent.

Considerable weakness was also visible among oil service stocks, as reflected by the 4.0 percent nosedive by the Philadelphia Oil Service Index.

Steel, computer hardware and networking stocks are also saw notable weakness, while interest rate-sensitive utilities and real estate stocks bucked the downward trend.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region turned in a mixed performance on Thursday. Japan’s Nikkei 225 Index plunged by 2.5 percent and China’s Shanghai Composite Index dipped by 0.2 percent, while South Korea’s Kospi rose by 0.3 percent.

Meanwhile, European stocks moved sharply lower on the day. While the U.K.’s FTSE 100 slumped by 1.0 percent, the French CAC 40 Index and the German DAX Index dove be by 2.1 percent and 2.3 percent, respectively.

In the bond market, treasuries moved sharply higher amid renewed concerns about the economic outlook. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, plunged 13.3 basis points to 3.976 percent.

Looking Ahead

Trading on Friday is likely to be driven by reaction to the Labor Department’s closely watched report on employment in the month of July.

On the earnings front, Amazon (NASDAQ:AMZN), Apple (NASDAQ:AAPL) and Intel (NASDAQ:INTC) are among the companies due to report their quarterly results after the close of today’s trading.

Energy giants Exxon Mobil (NYSE:XOM) and Chevron (NYSE:CVX) are also due to report their quarter results before the start of trading on Friday.

SOURCE: RTTNEWS

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