Stocks Close Modestly Lower Amid Geopolitical Uncertainty – U.S. Commentary

Selling pressure was somewhat subdued, although stocks still moved modestly lower over the course of the trading session on Thursday. The major averages all ended the day in negative territory after the mixed performance in the previous session.

The Dow fell 69.16 points or 0.3 percent to 25,918.00, the Nasdaq slipped 21.98 points or 0.3 percent to 7,532.53 and the S&P 500 dropped 7.89 points or 0.3 percent to 2,784.49.

The modest weakness on Wall Street came after the summit between President Donald Trump and North Korean leader Kim Jong Un ended abruptly without an agreement on the denuclearization of the Korean peninsula.

Trump told reporters the North Korean dictator wanted the U.S. to lift all sanctions without having to give up all of his weapons of mass destruction.

“Basically, they wanted the sanctions lifted in their entirety and we couldn’t do that,” Trump said. “They were willing to de-nuke a large portion of the areas that we wanted, but we couldn’t give up all of the sanctions for that.”

“So we continue to work and we’ll see, but we had to walk away from that particular suggestion,” he added. “We had to walk away from that.”

The president noted that the two sides will continue to work toward an agreement, although the lack of a deal at the summit added to recent uncertainty on Wall Street.

However, the negative sentiment was partly offset by a report from the Commerce Department showing U.S. economic growth slowed by less than expected in the fourth quarter of 2018.

The report said real gross domestic product climbed by 2.6 percent in the fourth quarter compared to the 3.4 percent jump in the third quarter. Economists had expected GDP to increase by 2.3 percent.

Paul Ashworth, Chief U.S. Economist at Capital Economics, said the details of the report show “better-than-forecast contributions from domestic consumption and business investment.”

“Nevertheless, as a result of the already-reported weakness in retail sales and exports in the final month of last year, we expect first-quarter GDP growth to be a more disappointing 1.5% annualized,” he added.

Sector News

Computer hardware stocks showed a significant move to the downside on the day, dragging the NYSE Arca Computer Hardware Index down by 1.7 percent.

HP Inc. (HPQ) led the sector lower after the personal computer and printer maker reported fiscal first quarter revenues that came in below analyst estimates.

Considerable weakness also emerged among housing stocks, as reflected by the 1.5 percent drop by the Philadelphia Housing Sector Index.

Oil service, chemical, and steel stocks also saw notable weakness, moving lower along with most of the other major sectors.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved mostly lower during trading on Thursday. Japan’s Nikkei 225 Index slid by 0.8 percent, while Hong Kong’s Hang Seng Index fell by 0.4 percent.

Meanwhile, the major European markets turned in a mixed performance on the day. While the U.K.’s FTSE 100 Index fell by 0.5 percent, the German DAX Index and the French CAC 40 Index both rose by 0.3 percent.

In the bond market, treasuries turned lower over the course of the session after seeing initial strength. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, ticked up by 1.8 basis points to 2.711 percent.

Looking Ahead

Economic data is likely to continue to attract attention on Friday, with traders keeping an eye on reports on personal income and spending, manufacturing activity, and consumer sentiment.

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