U.S. MARKETS:

After ending the previous session mostly lower, stocks saw further downside during trading on Wednesday. The major averages all decreased on the day, with the tech-heavy Nasdaq showing a notable decline.

The major averages climbed off their worst levels in afternoon trading but remained firmly negative. The Nasdaq tumbled 148.48 points or 1.1 percent to 13,872.47, the S&P 500 slid 31.35 points or 0.7 percent to 4,465.48 and the Dow fell 198.78 points or 0.6 percent to 34,443.19.

The continued weakness on Wall Street partly reflected ongoing concerns about the outlook for the global economy following the recent release of disappointing data from overseas.

A recent surge in oil prices added to the negative sentiment amid worries higher oil prices could keep inflation at elevated levels.

The price of crude oil has reached its highest levels since last November after Saudi Arabia and Russia extended supply cuts until the end of the year.

Stocks saw further downside following the release of a report from the Institute for Supply Management showing an unexpected acceleration in the pace of U.S. service sector growth in the month of August.

The ISM said its services PMI rose to 54.5 in August from 52.7 in July, with a reading above 50 indicating growth in the sector. The increase surprised economists, who had expected the index to edge down to 52.5.

The data added to recent concerns about the outlook for interest rates, as the report also showed an acceleration in the pace of price growth. The prices index rose to 58.9 in August from 56.8 in July

"The ISM Services Sector report underscores the resilience of the largest portion of the economy as the headline print came in higher than expectations, underpinned by a stronger new orders metric," said Quincy Krosby, Chief Global Strategist for LPL Financial. "Unfortunately, the prices paid component moved in the wrong direction -- similar to the higher prices paid in the manufacturing report--edging markedly higher."

"This is certainly not good news for a data dependent Fed, as the immediate reaction in the Treasury market saw the ten-year Treasury yield jump higher while equities remain under pressure," she added. "With oil and food prices also higher, this report points to a Fed whose job to quell inflation is certainly not yet quite finished."

In other U.S. economic news, the Commerce Department released a report showing the U.S. trade deficit widened in the month of July.

The report said the trade deficit increased to $65.0 billion in July from a revised $63.7 billion in June. Economists had expected the trade deficit to rise to $65.8 billion from the $65.5 billion originally reported for the previous month.

The wider trade deficit came as the value of imports climbed by 1.7 percent to $316.7 billion, while the value of exports rose by 1.6 percent to $251.7 billion.

Sector News

Telecom stocks turned in some of the market's worst performances on the day, resulting in a 1.9 percent slump by the NYSE Arca North American Telecom Index.

Significant weakness was also visible among airline stocks, as reflected by the 1.4 percent drop by the NYSE Arca Airline Index.

Banking stocks also showed a considerable move to the downside, dragging the KBW Bank Index down by 1.4 percent.

Natural gas, tobacco and steel stocks also saw notable weakness, while some strength emerged among housing stocks.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region turned in a mixed performance during trading on Wednesday. Japan's Nikkei 225 Index climbed by 0.6 percent, while South Korea's Kospi slid by 0.7 percent.

Meanwhile, the major European markets have all moved to the downside on the day. While the French CAC 40 Index slumped by 0.8 percent, the U.K.'s FTSE 100 Index and the German DAX Index both edged down by 0.2 percent.

In the bond market, treasuries moved lower over the course of the session after seeing initial strength. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, rose 2.2 basis points to 4.290 percent.

Looking Ahead

Trading on Thursday may be impacted by reaction to the Labor Department's report on initial jobless claims in the week ended September 2nd.

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