(RTTNews) - After turning in a lackluster performance over the three previous sessions, stocks saw notable weakness during trading on Thursday. Uncertainty ahead of a key speech by Federal Reserve Chairman Ben Bernanke contributed to the weakness on Wall Street.
The major averages moved to the downside going into the close, with the S&P 500 ending the day just below 1,400. The S&P 500 fell 11.01 points or 0.8 percent to 1,399.48, while the Dow slid 106.77 points or 0.8 percent to 13,000.71 and the Nasdaq dropped 32.48 points or 1.1 percent to 3,048.71.
The weakness on Wall Street came as traders expressed caution ahead of Bernanke's speech to the Kansas City Fed's Jackson Hole symposium on Friday, with some traders looking to safe havens ahead of the Fed chief's remarks.
Many traders expect Bernanke to make comments indicating whether the central bank will engage in another round of quantitative easing.
A research note from Capital Economics said, "Given the unexpectedly strong signal in the minutes of the latest FOMC meeting that QE3 is coming fairly soon, we expect that Fed Chairman Ben Bernanke will reinforce the case for more action in his speech at Jackson Hole."
"Although a few of the non-voting regional Fed Presidents still appear to have reservations, we doubt that the slight uptick in the incoming economic data in the past couple of weeks will have softened Bernanke's resolve," the note added.
Further selling pressure was generated by a report from Bloomberg News indicating that Spanish Prime Minister Mariano Rajoy said his government will delay deciding whether to seek a sovereign bailout until the aid conditions are clear.
Traders also digested the latest batch of U.S. economic data, including a report from the Labor Department showing that jobless claims unexpectedly came in unchanged in the week ended August 25th.
The report said initial jobless claims came in at 374,000, unchanged compared to the previous week's revised figure. Economists had expected jobless claims to edge down to 370,000 from the 372,000 originally reported for the previous week.
A separate report from the Commerce Department showed that personal income rose by 0.3 percent in July, matching the increases seen in the two previous months. The increase also came in line with economist estimates.
The report also showed that personal spending increased by 0.4 percent in July after coming in flat in June. The spending growth also matched the expectations of economists.
Networking stocks saw substantial weakness on the day, with the NYSE Arca Networking Index falling by 3.1 percent. The loss by the index came after it ended the previous session at its best closing level in over two months.
Ciena (CIEN) helped to lead the networking sector lower after reporting a wider than expected third quarter loss and providing disappointing guidance. Shares of Ciena tumbled by 19.5 percent on the news.
Considerable weakness was also visible among electronic storage stocks, as reflected by the 3 percent loss posted by the NYSE Arca Disk Drive Index. Seagate Technology (STX) and Western Digital (WDC) turned in two of the sector's worst performances.
Steel stocks also showed a significant move to the downside, dragging the NYSE Arca Steel Index down by 1.8 percent. Semiconductor, computer hardware, trucking, and oil service stocks also came under pressure amid broad based weakness in the markets.
In overseas trading, stock markets across the Asia-Pacific region moved mostly lower during trading on Thursday. Japan's Nikkei 225 Index dropped by 1 percent, while Hong Kong's Hang Seng Index ended the day down by 1.2 percent.
The major European markets also moved to the downside on the day. While the German DAX Index tumbled by 1.6 percent, the French CAC 40 Index fell by 1 percent, and the U.K.'s FTSE 100 Index slid by 0.4 percent.
In the bond market, treasuries moved moderately higher amid optimism about further bond purchases by the Fed. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, fell by 3.4 basis points to 1.62 percent.
While trading on Friday is likely to be driven by reaction to Bernanke's speech, reports on consumer sentiment, factory orders, and Chicago-area business activity are also due to be released on the day.
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