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(RTTNews) - Stocks plunged on Thursday following the release of some troubling economic data that reignited concerns over the health of the economy. The data prompted investors to lock in profits from the rally seen in the past several days.

Before the markets opened, the Department of Labor released its report on initial jobless claims in the week ended July 19th, showing that jobless claims for the week increased by much more than economists had been anticipating.

The report showed that jobless claims jumped to 406,000 from the previous week's revised figure of 372,000. Economists had been expecting jobless claims to increase to 380,000 from the 366,000 originally reported for the previous week.

Stocks saw further weakness after the National Association of Realtors reported that existing home sales fell more than expected in the month of June, with many potential home buyers waiting on the sidelines.

The report showed that existing home sales fell 2.6 percent to an annual rate of 4.86 million units in June from a 4.99 million unit rate in May. Economists had been expecting a more modest decrease in existing home sales to a 4.95 million unit rate.

The decrease comes as many potential home buyers are reluctant to get into the market, with NAR President Richard F. Gaylord noting that a recent survey of realtors showed that nearly a quarter of potential home buyers are waiting on the sidelines.

Commenting on the data, Michelle Meyer from Lehman Brothers said, “While home sales were weaker than expected in June, it is not too surprising given difficult housing conditions.” Meyer added, “While home prices have fallen sharply, it is unlikely they have reached a bottom.”

While the focus was on the weak economic data, there were a few bright spots in the markets, as earnings season continues on in full force. Amazon.com (AMZN) and 3M (MMM) were among the many companies that released their quarterly results, with both companies reporting earnings that beat expectations.

Nonetheless, not all quarterly results were positive, as Ford Motor (F) and Dow Chemical (DOW) both reported results that disappointed investors.

The major averages saw additional selling pressure in the afternoon, ending the day just off of their worst levels of the day. The Dow closed down 283.10 points or 2.4 percent at 11,349.28, the Nasdaq closed down 45.77 points or 2 percent at 2,280.11 and the S&P 500 closed down 29.65 points or 2.3 percent at 1,252.54.

Sector News

Airline stocks turned in some of the worst performances, as an increase in oil prices prompted investors to lock in profits from the rallies seen in the past few days. The Amex Airline Index closed down 11.1 percent, moving off of a two-month closing high set on Wednesday. The price of crude ended the day up $1.05 at $125.49 a barrel.

Bank stocks also saw significant selling pressure after the weak housing report spooked investors out of institutions like Fannie Mae (FNM) and Freddie Mac (FRE). The S&P Bank Index fell 7.3 percent, pulling back from Wednesday’s monthly closing high.

Within the bank sector, Washington Mutual (WM) fell 13.3 percent. After the markets closed on Tuesday, WaMu reported a sharp loss in its second quarter, prompting Standard & Poor’s Ratings Service to cut the company’s counter-party credit rating.

Brokerage stocks also showed considerable weakness. The Amex Securities Broker/Dealer Index fell 6.5 percent, adding to a modest loss posted in the previous session. Earlier in the day, the NY Attorney General Andrew Cuomo revealed the filing of a multi-billion dollar securities fraud lawsuit against two UBS (UBS) units for falsely selling and marketing auction rate securities as safe, highly liquid, and cash-equivalent securities.

Following the release of the dismal report on existing home sales, housing stocks closed sharply lower as well. The Philadelphia Housing Index ended the day down 8.6 percent, ending a recent uptrend. Real estate and steel stocks closed notably lower as well.

On the other hand, the telecommunications sector ended the day with a substantial gain, led higher by Qualcomm (QCOM) after the company announced a fifteen-year agreement with Nokia (NOK). Qualcomm closed up 17 percent, contributing to a 4.9 percent gain in the Amex Telecommunications Index.

Dow Components

The majority of the Dow components ended the day with substantial losses, sending the blue chip index sharply lower. Of the 30 stocks that make up the Dow, only 4 ended the day with any strength.

General Motors (GM) turned in one of the worst performances after its rival Ford reported a huge loss in its second quarter. Shares of GM closed down 11.1 percent, pulling back from a monthly closing high set on Wednesday.

Boeing (BA) also saw significant selling pressure after being downgraded to a Neutral rating by an analyst at Cowen. Analyst Cai von Rumohr said that the latest 878 schedule slip will make it harder for the company to reach its margin guidance.

Shares of the airplane manufacturer saw a decline of 6.3 percent, adding to a sharp loss posted in the previous session. With the decline, the stock set a two-year closing low.

American Express (AXP) ended the day sharply lower as well, giving back all of the gain posted in the previous session. The stock closed at its worst level in five years, down 7.5 percent.

Taking their cues from the weak financial sector, Citigroup (C), Bank of America (BAC) and JP Morgan (JPM) also posted notable losses. Citigroup closed down 9.8 percent, Bank of America closed down 8.4 percent and JP Morgan Chase closed down 6.7 percent.

Alcoa (AA) showed considerable weakness as well. Shares of the aluminum producer closed down 4.4 percent, extending a recent downtrend. With the decline, the stock set a six-month closing low.

On the other hand, Merck (MRK) posted a notable gain. Shares of the drug maker climbed 1.4 percent, adding to a modest increase seen in the previous session. Earlier in the week, the stock dropped sharply after a study showed its cholesterol drug Vytorin failed to show effectiveness in stopping the progression of a major heart valve problem.

Johnson & Johnson (JNJ), IBM (IBM) and 3M (MMM) ended the day with modest strength as well. Johnson & Johnson closed up 0.6 percent, compared to a 0.4 percent gain by IBM. 3M closed up 0.4 percent after reporting a 3 percent increase in second quarter profits, helped by strong international sales growth.

Other Markets

Stock markets across the Asia-Pacific region closed mostly higher for a fourth day on Thursday after oil prices fell to a seven-week low below $125 a barrel, easing inflation fears. Japan, South Korea and China each gained more than 2%, although India and Hong Kong finished in negative territory.

Meanwhile, the major European markets moved to the downside on Thursday. The French CAC 40 Index and the German DAX Index closed down 1.4 percent and 1.5 percent, respectively, while the U.K.’s FTSE 100 Index fell 1.6 percent.

On the other hand, treasuries ended the day with strong gains. The benchmark ten-year note rose at the start of trading and then climbed in steps throughout the day, closing just off of its best level of the day. Subsequently, the yield on the ten-year note closed down 13.2 basis points at 4.016 percent.

Looking Ahead

Looking ahead to Friday, the markets may be affected when the Department of Commerce releases its durable goods data, which reflects new orders for good meant to last at least three years. Economists are expecting durable goods to show a decline of 0.4 percent in June.

Additionally, the Commerce Department will release its data on new home sales for the month of June, while the University of Michigan will release a revised reading on its consumer sentiment index for July.

On the earnings front, Chubb Corp. (CB), Eastman Chemical (EMN) and Juniper Networks (JNPR) will release their quarterly results after the closing bell on Thursday. On Friday, Fortune Brands (FO), Legg Mason (LM) and Netflix (NFLX) will report before the markets open.

For comments and feedback: contact editorial@rttnews.com

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