RTTNews - Stocks snapped a four-day winning streak on Wednesday, seeing a moderate retreat over the course of the trading session. The major averages all moved lower, as traders did some profit taking in reaction to some discouraging economic data.
Earlier in the day, Automatic Data Processing, Inc. (ADP) released a report showing that private sector employment experienced another notable decline in the month of May, with the decrease in jobs slightly exceeding economist estimates.
ADP said non-farm private employment fell by 532,000 jobs in May following a revised decrease of 545,000 jobs in April. Economists had expected a decrease of about 525,000 jobs compared to the decline of 491,000 jobs originally reported for the previous month.
While a separate report from the Institute for Supply Management showed a slower pace of contraction in the service sector in the May, the index of activity in the sector increased by less than economists had expected.
The ISM said its index of activity in the service sector rose to 44.0 in May from 43.7 in April, although a reading below 50 indicates a continued contraction in the sector. Economists had been expecting a somewhat more notable increase to a reading of 45.0.
Additionally, the Commerce Department released data showing a notable increase in factory orders in the month of April, but the increase came after a substantial decline in the previous month and came in slightly below economist estimates.
Traders largely shrugged off comments from Federal Reserve Chairman Ben Bernanke, who said recent data suggests that the economy will likely slow its pace of contraction on the back of improved consumer sentiment and consumer spending.
Bernanke also warned of the potentially dire consequences of allowing the deficit to remain high and called on Congress to consider long-term steps for fiscal balance.
While the major averages moved well off their worst levels of the day in late day trading, they remained firmly negative. The Dow closed down 65.63 points or 0.8 percent at 8675.24, the Nasdaq closed down 10.88 points or 0.6 percent at 1825.92, and the S&P 500 fell 12.98 points or 1.4 percent to 931.76.
With most major commodities prices showing notable declines during the session, resource stocks turned in some of the market's worst performances.
Specifically, the Philadelphia Oil Service Index fell by 4.8 percent on the day, backing off of the nearly eight-month closing high reached on Monday.
The weakness among oil service stocks came as the price of oil fell more than $2 a barrel after a report showed an unexpected increase in crude oil inventories. In addition, oil refiner Valero (VLO) forecasted a loss for the second quarter, further driving down prospects in the sector.
The Amex Gold Bugs Index also saw a notable retreat, falling by 6.1 percent on the day. The weakness among gold stocks came as the price of the precious metal plunged by nearly $19 an ounce.
While housing, healthcare provider, and wireless stocks also steep losses, biotechnology stocks bucked the downtrend by the broader markets, with the Amex Biotechnology Index surging up 3.1 percent.
The majority of the Dow components finished lower, contributing to the moderate loss posted by the blue chip index.
Despite the broad based losses on the day, shares of Microsoft (MSFT) were able to post considerable gains on the day. The stock rose by 1.5 percent, closing at its best level in almost seven months.
Shares of McDonald's (MCD) and Wal-Mart (WMT) also helped to limit the day's losses, rising by 1.9 and 1.0 percent on the day.
Meanwhile, Alcoa (AA) and DuPont (DD) came under considerable pressure, falling 4.3 percent and 3.9 percent, respectively. Alcoa moved off of its best closing high in over four months, while DuPont continued to pull back off a seven month closing high set on Monday.
Shares of Citigroup (C), Caterpillar (CAT) and General Electric (GE) are also helped to lead the blue chip index downward.
In overseas trading, stock markets across the Asia-Pacific region finished modestly higher on Wednesday. Japan's benchmark Nikkei 225 Index rose by 0.4 percent, while Hong Kong's Hang Seng climbed by 1 percent.
Meanwhile, the major European markets all closed notably lower. The U.K.'s FTSE 100 Index fell by 2.1 percent, while the French CAC 40 Index and the German DAX Index closed down by 2.0 percent and 1.7 percent, respectively.
In the bond markets, treasuries posted notable gains amid the sell-off on Wall Street. Subsequently, the yield on the benchmark ten-year note closed at 3.551 percent, a drop of 9.3 basis points on the day.
Thursday's trading is likely to be influenced by a fresh influx of key economic data ahead of the opening bell on Wall Street. Traders will look to initial jobless claims figures for the week ended May 30th from the Labor Department. The figure is expected to improve to 620,000 first time claims compared to last week's figure of 623,000.
In a separate report, the Labor Department will reveal revised productivity and labor cost figures for the first quarter of 2009. Both reports will be released at 8:30 a.m. ET.
Traders will also look to more comments from Fed Chief Ben Bernanke, who is set to remark on financial markets and monetary policy in the nation's capital at 8:45 a.m. ET.
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