European Stocks In Corrective Phase

NEW YORK (TheStreet) -- It appears the European financial markets have entered into a corrective phase in Thursday trade with the dollar strengthening and with equities and commodities retracing some of their recent gains.

European markets were declining at a very strong pace, with the U.K. FTSE, German DAX and France CAC indices plunging more than 1.5%.

The declines were mostly led by the heavyweight sectors of basic materials, banks, insurers and technology, with each of them dropping more than 2%. This is the first time over the last few weeks that a move like this has happened and it usually points to broad market weakness. The Eastern European stocks fell 1% in Thursday trading, being sheltered from the declines seen in the banking and insurance sectors.

S&P 500 futures managed to break below the 1075.00 area through the European trading hours, an area that has acted as a very important swing point lately. If the S&P futures extend the current downtrend, the next important support is in the 1060 area.

The vast majority of declines came from basic materials, financials and from the technology sectors, but the selling wave started after Ericsson(ERIC Quote), one of Europe's biggest corporations, posted weaker-than-expected quarterly results. This made Ericsson plunge 7% in Thursday trade, dragging the entire technology sector lower.

In the banking sector, Commerzbank plunged 3%, matching the declines posted by Credit Suisse(CS Quote) and UBS(UBS Quote). The financial sector took very strong hits over the last two trading sessions, as the Treasury is trying to impose pay cuts on rescued banks, and analysts downgraded Wells Fargo(WFC Quote).

Despite the weakness seen in the European markets, the food and beverage sector posted some small gains, helped by Nestle's better-than-expected earnings.

The weekly unemployment claims report will be issued in the U.S. at 8:30 a.m. EDT.