Profit Taking Contributes To Pullback On Wall Street

Stocks showed a lack of direction early in the trading day on Thursday but moved mostly lower over the course of the session. The pullback on the day partly offset the strong gains posted in the previous session.

The major averages ended the day firmly in negative territory but well off their lows of the session. The Dow fell 101.78 points or 0.4 percent to 24,474.12, the Nasdaq slumped 90.90 points or 1 percent to 9,284.88 and the S&P 500 slid 23.10 points or 0.8 percent to 2,948.51.

The weakness on Wall Street was partly due to profit taking, as some traders cashed in on the strong gains posted on Monday and Wednesday.

The advance seen in the previous session lifted the Nasdaq to a three-month closing high, while the S&P 500 reached its best closing level since early March.

The tech-heavy Nasdaq has shown a particularly strong recovery from its March lows and ended Wednesday’s trading less than 5 percent below the record high set in February.

Traders were also reacting to a Labor Department report showing initial jobless claims pulled back further off their record high but remain at an elevated level.

The report said initial jobless claims dropped to 2.438 million in the week ended May 16th, a decrease of 249,000 from the previous week’s revised level of 2.687 million.

Economists had expected jobless claims to tumble to 2.400 million from the 2.981 million originally reported for the previous week.

Jobless claims fell for the seventh straight week after reaching a record high of 6.867 million in the week ended March 28th.

The total number of new claims since the coronavirus-induced lockdowns began in mid-March still reached 38.6 million.

Meanwhile, the National Association of Realtors released a report showing another steep drop in U.S. existing home sales in the month of April.

NAR said existing home sales plunged by 17.8 percent to an annual rate of 4.33 million in April after tumbling by 8.5 percent to 5.27 million in March. Economists had expected existing home sales to plummet to a rate of 4.30 million.

The continued nosedive pulled existing home sales down to their lowest level since hitting 3.45 million in July of 2010.

Sector News

Gold stocks regained some ground after an early sell-off but still ended the day sharply lower. The NYSE Arca Gold Bugs Index plunged by 2.9 percent, pulling back further off the seven-year intraday high set in early trading on Wednesday.

The weakness among gold stocks came amid a sharp drop by the price of the precious metal, with gold for June delivery plunging $30.20 to $1,721.90 an ounce.

Significant weakness was also visible among semiconductor stocks, as reflected by the 2.7 percent slump by the Philadelphia Semiconductor Index. The index ended the previous session at a three-month closing high.

Oil stocks also saw considerable weakness even as the price of crude oil for July delivery rose $0.43 to $33.92 a barrel. The NYSE Arca Oil Index slid 1.6 percent after ending Wednesday’s trading at its best closing level in well over two months.

Networking, biotechnology and software stocks also moved to the downside, while housing stocks moved higher despite the steep drop in existing home sales.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved mostly lower during trading on Thursday. Japan’s Nikkei 225 Index dipped by 0.2 percent, while China’s Shanghai Composite Index fell by 0.6 percent.

The major European markets also moved to the downside on the day. While the German DAX Index tumbled by 1.4 percent, the French CAC 40 Index slumped by 1.2 percent and the U.K.’s FTSE 100 Index slid by 0.9 percent.

In the bond market, treasuries showed a lack of direction before ending the session roughly flat. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, edged down by less than a basis point to 0.677 percent.

Looking Ahead

A lack of major U.S. economic data may lead to a choppy trading session on Friday as some traders look to get a head start on the long Memorial Day weekend.

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