U.S. Stocks Move Sharply Lower Following Disappointing Economic Data

Stocks saw initial strength during trading on Wednesday but moved sharply lower over the course of the session. The major averages all showed notable moves to the downside after ending Tuesday’s trading mixed.

The major averages fell to new lows for the session going into the close of trading. The Dow plunged 613.89 points or 01.8 percent to 33,296.96, the Nasdaq slumped 138.10 points or 1.2 percent to 10,957.01 and the S&P 500 tumbled 62.11 points or 1.6 percent to 3,928.86.

The sell-off on Wall Street came as traders reacted to a slew of U.S. economic data, including a Commerce Department report showing a steep drop in U.S. retail sales in the month of December.

The Commerce Department said retail sales tumbled by 1.1 percent in December after slumping by a revised 1.0 percent in November.

Economists had expected retail sales to decrease by 0.8 percent compared to the 0.6 percent drop originally reported for the previous month.

Andrew Hunter, Senior US Economist at Capital Economics, said the steep drop in retail sales “adds to the evidence from the surveys that the economy was rapidly losing momentum towards the end of last year.”

“Although GDP growth still looks to have held up over the fourth quarter as a whole, we continue to expect the economy to fall into recession in the first half of this year,” Hunter added.

A separate report released by the Federal Reserve showing industrial production in the U.S. decreased by much more than expected in the month of December.

The Fed said industrial production slid by 0.7 percent in December after falling by a revised 0.6 percent in November. Economists had expected industrial production to edge down by 0.1 percent compared to the 0.2 percent dip originally reported for the previous month.

Meanwhile, the initial strength on Wall Street came after a report from the Labor Department showed U.S. producer prices fell by more than expected in the month of December.

The Labor Department said its producer price index for final demand declined by 0.5 percent in December after inching up by a revised 0.2 percent in November.

Economists had expected producer prices to edge down by 0.1 percent compared to the 0.3 percent increase originally reported for the previous month.

The report also showed the annual rate of producer price growth slowed to 6.2 percent in December from 7.3 percent in November. The year-over-year growth was expected to slow to 6.8 percent.

Sector News

Oil service stocks moved sharply lower over the course of the session, dragging the Philadelphia Oil Service Index down by 3.2 percent. The index ended the previous session at its best closing level in over three years.

The pullback by oil service stocks came amid a decrease by the price of crude oil, with crude for February delivery falling $0.70 to $79.48 a barrel.

Substantial weakness was also visible among banking stocks, as reflected by the 2.6 percent nosedive by the KBW Bank Index.

Utilities stocks also showed a significant move to the downside on the day, resulting in a 2.6 percent slump by the Dow Jones Utility Average.

Natural gas, tobacco and telecom stocks also saw considerable weakness, moving lower along with most of the other major sectors.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved mostly higher during trading on Wednesday. Japan’s Nikkei 225 Index surged by 2.5 percent, while Hong Kong’s Hang Seng Index rose by 0.5 percent.

Meanwhile, the major European markets turned in a mixed performance on the day. While the French CAC 40 Index inched up by 0.1 percent, the German DAX Index closed just below the unchanged line and the U.K.’s FTSE 100 Index dipped by 0.3 percent.

In the bond market, treasuries moved sharply higher in reaction to the latest economic data. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, plunged by 16 basis points to a four-month closing low of 3.375 percent.

Looking Ahead

Trading on Thursday may be impacted by reaction to another batch of U.S. economic data, including reports on weekly jobless claims, housing starts and Philadelphia-area manufacturing activity.

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