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Stocks Close Sharply Lower Amid Global Economic Worries - U.S. Commentary

Stocks moved sharply lower over the course of the trading day on Friday, giving back some ground after posting strong gains in the two previous sessions. Renewed concerns about corporate earnings and the global economy contributed to the weakness in the markets.

The major averages saw further downside going into the close, ending the session near their worst levels of the day. The Dow slid 136.99 points or 1.1 percent to 12,849.59, the Nasdaq tumbled 44.22 points or 1.5 percent to 3,011.33 and the S&P 500 fell 17.31 points or 1.3 percent to 1,370.26.

With the losses on the day and the sell-off seen earlier in the week, the major averages all posted weekly losses. The Dow fell by 1.6 percent, while the Nasdaq and the S&P 500 dropped by 2.2 percent and 2 percent, respectively.

The pullback on Wall Street on Friday was partly due to disappointing economic news out of China, the world's second largest economy behind the U.S.

Data released by the Chinese National Bureau of Statistics showed that Chinese economic growth slowed to 8.1 percent in the first quarter from 8.6 percent in the fourth quarter. Economists had expected a more modest slowdown to 8.4 percent.

Traders also reacted negatively to quarterly results from JP Morgan (JPM) and Wells Fargo (WFC), which closed notably lower despite reporting better than expected first quarter earnings.

JP Morgan reported first quarter earnings of $1.31 per share, well above analyst estimates for $1.18 per share. While the company also reported a 6 percent increase in total revenues, investment banking revenue fell by 11 percent.

Meanwhile, Wells Fargo reported first quarter earnings of $0.75 per share on revenues of $21.6 billion compared to analyst estimates for earnings of $0.73 per share on revenues of $20.4 billion.

Following the release of the results, shares of JP Morgan fell by 3.6 percent, while shares of Wells Fargo closed down by 3.5 percent.

Additional negative sentiment was generated by a report from Reuters and the University of Michigan showing an unexpected deterioration in U.S. consumer sentiment in the month of April.

The report showed that the preliminary reading on consumer sentiment in the month of April fell to 75.7 compared to March's final reading of 76.2. Economists had expected the index to come in unchanged compared to the previous month.

A separate report from the Labor Department showed an increase in consumer prices in the month of March that matched economic estimates.

Sector News

Financial stocks saw substantial weakness on the day following the news from JP Morgan and Wells Fargo, with the KBW Bank Index and the NYSE Arca Broker/Dealer Index tumbling by 3.1 percent and 3.2 percent, respectively.

Bank of America (BAC), Morgan Stanley (MS), and Goldman Sachs (GS) turned in some of the financial sector's worst performances.

Considerable weakness was also visible among oil service stocks, as reflected by the 2.3 percent loss posted by the Philadelphia Oil Service Index. The weakness in the sector comes as crude for May delivery fell $0.81 to $102.83 a barrel.

Steel stocks also posted steep losses on the day, moving back to the downside after rising sharply on Thursday. The NYSE Arca Steel Index ended the day down by 2 percent and surging up by 4.7 percent in the previous session.

Most of the other major sectors also moved to the downside, with telecom, biotechnology, networking, and semiconductor stocks posting notable losses.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved to the upside on Friday, adding to Thursday's gains. Japan's Nikkei 225 Index advanced by 1.2 percent, while Hong Kong's Hang Seng Index jumped by 1.8 percent.

Meanwhile, the major European markets came under considerable pressure on the day. While the U.K.'s FTSE 100 Index fell by 1 percent, the German DAX Index and the French CAC 40 Index tumbled by 2.4 percent and 2.5 percent, respectively.

In the bond market, treasuries moved back to the upside after closing lower in the two previous sessions. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, fell by 5.1 basis points to 1.998 percent.

Looking Ahead

Earnings season will start to pick up steam next week, with Bank of America (BAC), Citigroup (C), Intel (INTC), Microsoft (MSFT), General Electric (GE), McDonald's (MCD) and Coca-Cola (KO) among the slew of companies due to report their quarterly results.

Economic data may also attract some attention, as reports on retail sales, housing starts, industrial production, jobless claims, and existing home sales are all scheduled to be released next week.

by RTT Staff Writer

For comments and feedback: editorial@rttnews.com

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