U.S. Stocks Close Modestly Lower Ahead Of Jobs Report

After an early move to the downside, stocks fluctuated over the course of the trading session on Thursday. The major averages bounced back and forth across the unchanged line before closing modestly lower.

The Dow slipped 66.63 points or 0.2 percent to 35,215.89, the Nasdaq edged down 13.73 points or 0.1 percent to 13,959.72 and the S&P 500 dipped 11.50 points or 0.3 percent to 4,501.89.

The early weakness on Wall Street partly reflected continued concerns about U.S. debt after credit rating agency Fitch Ratings unexpectedly downgraded the United States’ credit rating on Tuesday.

Fitch downgraded the U.S.’ long-term foreign-currency issuer default rating to AA+ from AAA, citing a “steady deterioration in standards of governance over the last 20 years.”

“The repeated debt-limit political standoffs and last-minute resolutions have eroded confidence in fiscal management,” Fitch said.

Selling pressure remained somewhat subdued, however, as traders seemed reluctant to make significant moves ahead of the release of the closely watched monthly jobs report on Friday.

Some traders subsequently took the opportunity to pick up stocks at relatively reduced levels following the sell-off seen on Wednesday.

On the U.S. economic front, a report released by the Labor Department showed a modest increase in first-time claims for U.S. unemployment benefits in the week ended July 29th.

The Labor Department said initial jobless claims crept up to 227,000, an increase of 6,000 from the previous week’s unrevised level of 221,000. The uptick in jobless claims matched economist estimates.

The Institute for Supply Management also released a report showing a modest slowdown in the pace of growth in U.S. service sector activity in the month of July.

The ISM said its services PMI slipped to 52.7 in July from 53.9 in June, although a reading above 50 still indicates growth. Economists had expected the index to edge down to 53.0.

Sector News

Despite the lackluster performance by the broader markets, airline stocks showed a substantial move to the downside, dragging the NYSE Arca Airline Index down by 3.2 percent to its lowest closing level in almost two months.

Southwest Airlines (LUV) posted a steep loss after Jefferies downgraded its rating on the company’s stock to Underperform from Hold.

Significant weakness was also visible among interest rate-sensitive utilities stocks, as reflected by the 2.7 percent plunge by the Dow Jones Utility Average.

Networking, housing and chemical stocks also saw considerable weakness, while natural gas stocks showed a strong move to the upside along with the price of the commodity.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved mostly lower during trading on Thursday. Japan’s Nikkei 225 Index dove by 1.7 percent, while Hong Kong’s Hang Seng Index fell by 0.5 percent.

The major European markets also moved to the downside on the day. While the U.K.’s FTSE 100 Index declined by 0.4 percent, the French CAC 40 Index and the German DAX Index slid by 0.7 percent and 0.8 percent, respectively.

In the bond market, treasuries moved sharply lower, extending the downward move seen over the two previous sessions. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, surged 11.1 basis points to 4.189 percent.

Looking Ahead

Trading on Friday is likely to be driven by reaction to the Labor Department’s closely watched monthly jobs report, although earnings news from Apple (AAPL) and Amazon (AMZN) is also likely to attract attention.

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