U.S. Stocks Well Off Worst Levels But Remain Mostly Lower

Stocks have climbed well off their worst levels after an early sell-off but remain mostly lower in afternoon trading on Thursday. The weakness on the day comes after the major averages turned positive over the course of the previous session.

The major averages have moved roughly sideways in recent trading, stuck in negative territory. The Dow is down 151.61 points or 0.4 percent at 33,976.44, the Nasdaq is down 63.96 points or 0.5 percent at 12,006.63 and the S&P 500 is down 19.61 points or 0.5 percent at 4,127.99.

The early sell-off on Wall Street came following the release of a report showing a bigger than expected increase in producer prices.

The Labor Department said its producer price index for final demand climbed by 0.7 percent in January after edging down by a revised 0.2 percent in December.

Economists had expected producer prices to increase by 0.4 percent compared to the 0.5 percent drop originally reported for the previous month.

While the report also showed the annual rate of producer price growth slowed to 6.0 percent in January from 6.5 percent in December, the year-over-year growth was expected to slow to 5.4 percent.

Following the consumer price inflation and retail sales data released earlier this week, the report added to worries about the outlook for interest rates.

Traders have recently expressed concerns the Federal Reserve will raise rates higher than currently anticipated in an effort to combat inflation.

“The larger than expected increase to producer prices is unwelcome news to the Fed and reinforce the view that further policy tightening is needed to tame inflation,” said Matthew Martin, U.S. Economist at Oxford Economics.

A separate Labor Department report showed first-time claims for U.S. unemployment benefits unexpectedly edged slightly lower in the week ended February 11th.

The report said initial jobless claims slipped to 194,000, a decrease of 1,000 from the previous week’s revised level of 195,000.

Economists had expected jobless claims to inch up to 200,000 from the 196,000 originally reported for the previous week.

Michael Pearce, Lead US Economist at Oxford Economics, said the current level of jobless claims suggests labor market conditions remain “exceptionally tight.”

“That is consistent with most other indicators which suggest that the labor market is still carrying plenty of momentum, leaving the Fed on track to raise rates at its March meeting, and probably at the May meeting too,” Pearce added.

Sector News

Software stocks are seeing considerable weakness in afternoon trading, resulting in a 1.5 percent drop by the Dow Jones U.S. Software Index.

Significant weakness is also visible among airline stocks, as reflected by the 1.4 percent loss being posted by the NYSE Arca Airline Index.

Housing stocks are also seeing notable weakness following disappointing housing starts data, with the Philadelphia Housing Sector Index down by 1.2 percent.

Telecom and semiconductor stocks have also moved to the downside, while strength has emerged among steel, brokerage and tobacco stocks.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved mostly higher during trading on Thursday. Japan’s Nikkei 225 Index climbed by 0.7 percent, while Hong Kong’s Hang Seng Index advanced by 0.8 percent.

The major European markets also moved to the upside on the day. While the French CAC 40 Index jumped by 0.9 percent, the German DAX and the U.K.’s FTSE 100 Index both edged up by 0.2 percent.

In the bond market, treasuries have climbed well off their early lows but remain in negative territory. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, is up 2.3 basis points at 3.832 percent.

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