U.S. Stocks Give Back Ground After Yesterday’s Rally

Following the rally seen in the previous session, stocks have given back some ground in morning trading on Thursday. The major averages have all moved to the downside, with the Dow and the S&P 500 pulling back off their best closing levels in well over a month.

Currently, the major averages are off their lows of the session but still in negative territory. The Dow is down 84.51 points or 0.3 percent at 32,113.08, the Nasdaq is down 104.63 points or 0.9 percent at 11,927.79 and the S&P 500 is down 14.49 points or 0.4 percent at 4,009.12.

The pullback on Wall Street comes as some traders cash in on yesterday’s gains, which came even as the Federal Reserve announced another significant increase in interest rates.

While the Fed announced another 75 basis point rate hike, comments from Fed Chair Jerome Powell led to optimism the central bank may slow the pace of rate increases at coming meetings.

A sharp pullback by shares of Meta Platforms (META) is also weighing on the markets, with the parent of Facebook and Instagram plunging by 7.4 percent.

The steep drop by Meta comes after the company reported weaker than expected second quarter results, including its first ever year-over-year drop in revenues.

Some selling pressure has also been generated in a reaction to a Commerce Department report showing a continued contraction in U.S. economic activity in the second quarter of 2022.

The Commerce Department said real gross domestic product decreased by 0.9 percent in the second quarter after slumping by 1.6 percent in the first quarter. Economists had expected GDP to increase by 0.5 percent.

With GDP unexpectedly declining for the second consecutive quarter, the data signals the U.S. economy is in a technical recession.

Meanwhile, a separate report from the Labor Department showed a modest pullback in initial jobless claims in the week ended July 23rd.

The report showed initial jobless claims edged down to 256,000, a decrease of 5,000 from the previous week’s revised level of 261,000.

Economists had expected jobless claims to inch up to 253,000 from the 251,000 originally reported for the previous week.

Oil service stocks have pulled back sharply after turning in a strong performance on Wednesday, with the Philadelphia Oil Service Index tumbling by 3.1 percent.

The pullback by oil service stocks comes as the price of crude oil for September delivery is falling $0.71 to $96.55 a barrel after moving sharply higher earlier in the session.

Significant weakness is also visible among airline stocks, as reflected by the 2.4 percent slump by the NYSE Arca Airline Index.

Southwest Airlines (LUV) is posting a steep loss after reporting better than expected second quarter results but provided mixed guidance.

Tobacco, biotechnology and semiconductor stocks are also seeing considerable weakness, contributing to the pullback by the broader markets.

On the other hand, networking stocks have shown another substantial move to the upside, driving the NYSE Arca Networking Index up by 2.4 percent to its best intraday level in well over two months.

Interest rate-sensitive utilities and commercial real estate stocks are also turning in strong performances, while gold stocks are also moving notably higher along with the price of the precious metal.

In overseas trading, stock markets across the Asia-Pacific region moved mostly higher during trading on Thursday. Japan’s Nikkei 225 Index rose by 0.4 percent, while China’s Shanghai Composite Index edged up by 0.2 percent.

Meanwhile, the major European markets are turning in a mixed performance on the day. While the U.K.’s FTSE 100 Index is down by 0.5 percent, the German DAX Index is up by 0.2 percent and the French CAC 40 Index is up by 0.8 percent.

In the bond market, treasuries have climbed firmly into positive territory after seeing initial weakness. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, is down by 6 basis points at 2.674 percent.

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