U.S. Stocks See Further Downside After Early Sell-Off

After moving sharply lower in early trading, stocks have seen further downside over the course of the session on Thursday. The major averages are extending the pullback seen in the previous session, plunging to their lowest intraday levels in over a month.

Currently, the major averages are just off their lows of the session. The Dow is down 908.42 points or 2.7 percent at 33,057.93, the Nasdaq is down 381.72 points or 3.4 percent at 10,789.17 and the S&P 500 is down 111.71 points or 2.8 percent at 3,883.61.

Concerns about the outlook for interest rates continue to weigh on Wall Street after the Federal Reserve’s monetary policy announcement on Wednesday was deemed more hawkish than expected.

While the Fed raised interest rates by 50 basis points as widely expected, the accompanying statement and the central bank’s latest projections led to worries about where rates will peak.

A batch of disappointing U.S. economic data has also added to concerns the Fed’s aggressive interest rate hikes will push the economy into a recession.

Before the start of trading, the Commerce Department released a report showing retail sales pulled back by more than expected in the month of November.

The Commerce Department said retail sales slid by 0.6 percent in November after surging by 1.3 percent in October. Economists had expected retail sales to edge down by 0.1 percent.

Excluding a steep drop in sale by motor vehicle and parts dealers, retail sales slipped by 0.2 percent in November after jumping by 1.2 percent in October. Ex-auto sales were expected to inch up by 0.2 percent.

A separate report released by the Federal Reserve unexpectedly showed a modest decrease in U.S. industrial production in the month of November.

The Fed said industrial production slipped by 0.2 percent in November after edging down by 0.1 percent in October. Economists had expected industrial production to inch up by 0.1 percent.

The unexpected dip in industrial production came as manufacturing output fell by 0.6 percent and mining output slid by 0.7 percent.

Meanwhile, a 3.6 percent spike in utilities output helped limit the downside amid unseasonably cold weather across much of the country.

Separate reports from the New York and Philadelphia Federal Reserves also showed contractions in regional manufacturing activity in the month of December.

“The 0.6% m/m falls in retail sales and manufacturing output in November suggest that the economy has lost some serious momentum, with the resilience of consumers to much higher interest rates starting to crumble,” said Andrew Hunter, Senior U.S. Economist at Capital Economics.

He added, “Solid gains in previous months mean real consumption growth should still be strong in the fourth quarter as a whole, but we expect the economy to slip into a mild recession in the first half of next year as the Fed’s relentless hawkishness takes its toll.”

Sector News

Computer hardware stocks continue to see substantial weakness in afternoon trading, dragging the NYSE Arca Computer Hardware Index down by 5.1 percent to its lowest intraday level in a month.

Western Digital (WDC) has helped lead the sector lower after Goldman Sachs downgraded its rating on the data storage company stock to Sell from Neutral.

Significant weakness also remains visible among semiconductor stocks, as reflected by the 4.0 percent nosedive by the Philadelphia Semiconductor Index.

Software stocks have also come under pressure considerable pressure over the course of the session, with the Dow Jones U.S. Software Index plunging by 3.7 percent.

Steel, networking, retail and gold stocks have also shown notable moves to the downside amid broad based weakness on Wall Street.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved mostly lower during trading on Thursday. Japan’s Nikkei 225 Index fell by 0.4 percent, while Hong Kong’s Hang Seng Index slumped by 1.6 percent.

The major European markets also moved to the downside on the day. While the U.K.’s FTSE 100 Index slid by 0.9 percent, the French CAC 40 Index and the German DAX Index plunged by 3.1 percent and 3.3 percent, respectively.

In the bond market, treasuries have moved higher over the course of the session after ending yesterday’s trading roughly flat. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, is down by 6.9 basis points at 3.434 percent.

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