U.S. Stocks Show Notable Downturn After Seeing Early Strength

Stocks moved notably higher in early trading on Thursday but failed to sustain the advance and have shown a notable downturn over the course of the session. The major averages have pulled back well off their highs of the session and into negative territory.

Currently, the major averages are off their worst levels but still in the red. The Dow is down 67.31 points or 0.2 percent at 33,881.70, the Nasdaq is down 15.23 points or 0.1 percent at 11,895.29 and the S&P 500 is down 7.08 points or 0.2 percent at 4,110.78.

The initial upward move on Wall Street partly reflected a positive reaction to the latest batch of corporate earnings news.

Shares of Disney (DIS) moved sharply higher at the start of trading after the entertainment giant reported better than expected fiscal first quarter results. Disney has pulled back well off its highs since then but remains up by 2.0 percent.

Disney CEO Bob Iger also announced the company would be cutting 7,000 jobs as part of a broader cost-cutting and restructuring plan.

Snack and beverage giant PepsiCo (PEP) has also moved to the upside after reporting fourth quarter results that exceeded analyst estimates, raising its annualized dividend by 10 percent and announcing a $1.0 billion stock buyback.

Meanwhile, shares of Mattel (MAT) have plunged by 10.2 percent after the toymaker reported fourth quarter results that missed analyst estimates on both the top and bottom lines.

The subsequent pullback by the markets may partly reflect ongoing concerns about the outlook for interest rates following hawkish comments by some Federal Reserve officials.

“Arguments are being made for the Fed to raise rates to 6%, with one strategist calling for a move towards 8%,” said Edward Moya, senior maker analyst at OANDA. “A month ago, it seemed very likely that the Fed would be done raising rates in March and now that view could be changing.”

In U.S. economic news, a report released by the Labor Department showed first-time claims for U.S. unemployment benefits rebounded by slightly more than expected in the week ended February 4th.

The Labor Department said initial jobless claims rose to 196,000, an increase of 13,000 from the previous week’s unrevised level of 183,000. Economists had expected jobless claims to inch up to 190,000.

The uptick came after jobless claims decreased in four out of the five previous weeks, falling to their lowest level since hitting 181,000 in the week ended April 23, 2022.

Sector News

Oil service stocks have moved sharply lower over the course of the session, dragging the Philadelphia Oil Service Index down by 2.6 percent.

The sell-off by oil service stocks comes amid a decrease by the price of crude oil, with crude for March delivery falling $0.75 to $77.72 a barrel.

Significant weakness has also emerged among airline stocks, as reflected by the 2.5 percent slump by the NYSE Arca Airline Index.

Gold and chemical stocks have also moved notably lower as the day has progressed, while considerable strength remains visible among semiconductor stocks.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region turned in a mixed performance on Thursday. China’s Shanghai Composite Index surged by 1.2 percent, while Japan’s Nikkei 225 Index edged down by 0.1 percent and Australia’s S&P/ASX 200 Index fell by 0.5 percent.

Meanwhile, the major European markets all moved to the upside on the day. While the French CAC 40 Index jumped by 1.0 percent, the German DAX Index advanced by 0.7 percent and the U.K.’s FTSE 100 Index rose by 0.3 percent.

In the bond market, treasuries have pulled back off their highs of the session but remain in positive territory. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, is down by 4.4 basis points at 3.609 percent.

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