U.S. Stocks Close Modestly Lower Following Late-Day Pullback

Stocks saw modest strength for much of the trading session on Thursday before giving back ground going into the close. The major averages all slid into negative territory, with the Dow and the Nasdaq pulling back off the record intraday highs set in early trading.

The major averages finished the day modestly below the unchanged line. The Dow slipped 68.95 points or 0.2 percent to 30,991.52, the Nasdaq edged down 16.31 points or 0.1 percent to 13,112.64 and the S&P 500 fell 14.30 points or 0.4 percent to 3,795.54.

Optimism about additional fiscal stimulus helped generate early buying interest, as President-elect Joe Biden is expected to unveil a major relief package later today.

A report from CNN citing two people briefed on the deliberations said the price tag for the package is expected to be in the ballpark of $2 trillion.

The package is expected to include an increase in direct payments to Americans as well as an extension of increased unemployment insurance and support for state and local governments.

Meanwhile, trades were also reacting to a report from the Labor Department showing initial jobless claims jumped to their highest level in over four months in the week ended January 9th.

The report said initial jobless claims rose to 965,000, an increase of 181,000 from the previous week’s revised level of 784,000.

Economists had expected jobless claims to inch up to 795,000 from the 787,000 originally reported for the previous week.

With the bigger than expected increase, jobless claims reached their highest level since hitting 1.011 million in the week ended August 22nd.

Traders have recently viewed disappointing jobs data as a positive for the markets, as it could put further pressure on lawmakers to approve additional stimulus.

The pullback by stocks seemed to coincide with an advance by treasury yields, which rebounded following the pullback seen on Wednesday.

The increase by yields was partly attributed to remarks by Federal Reserve Chair Jerome Powell during a virtual event hosted by Princeton University.

In wide-ranging remarks, Powell suggested that the economy could return to pre-pandemic levels sooner than feared due to unprecedented fiscal stimulus and the Fed’s aggressive intervention.

“The thing that we’re most focused on is getting back to a strong labor market quickly enough that people’s lives can get back to where they want to be,” Powell said.

He added, “We were in a good place in February of 2020, and we think we can get back there, I would say, much sooner than we had feared.”

Despite the optimistic comments, Powell said the Fed does not intend to raise interest rate anytime soon and downplayed talk of the central bank tapering its bond purchases in the near future.

Sector News

Despite the late-day pullback by the broader markets, most of the major sectors moved to the upside during the session.

Airline stocks moved sharply higher on the day, with the NYSE Arca Airline Index soaring by 4.8 percent to its best closing level in a month.

Delta Air Lines (DAL) posted a notable gain after the airline reported a wider than expected fourth quarter loss but CEO Ed Bastian said he is optimistic 2021 will be a “year of recovery.”

Considerable strength was also visible among energy stocks, which moved higher along with the price of crude oil. Crude for February delivery climbed $0.66 to $53.57 a barrel.

Semiconductor stocks also turned in a strong performance on the day, driving the Philadelphia Semiconductor Index up by 2.1 percent to a new record closing high.

Steel, banking and networking stocks also ended the day notably higher, while weakness emerged among software, retail and chemical 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 jumped by 0.9 percent, while Australia’s S&P/ASX 200 Index rose by 0.4 percent.

The major European markets also moved to the upside on the day. While the U.K.’s FTSE 100 Index advanced by 0.8 percent, the German DAX Index and the French CAC 40 Index climbed by 0.4 percent and 0.3 percent, respectively.

In the bond market, treasuries came under pressure in the latter part of the trading session. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, climbed 4.1 basis points to 1.129 percent.

Looking Ahead

Trading on Friday may be impacted by reaction to a slew of U.S. economic data, including reports on retail sales, industrial production and consumer sentiment.

Earnings news may also attract attention, with financial giants Citigroup (C), JPMorgan Chase (JPM) and Wells Fargo (WFC) due to report their quarterly results before the start of trading.

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