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Stocks End Volatile Trading Day Mostly Lower - U.S. Commentary

After seeing considerable volatility in early trading on Friday, stocks drifted to the downside in the afternoon, ending the day mostly lower. Troubling news from JP Morgan (JPM) weighed on the markets along with lingering uncertainty about the political situation in Europe.

The major averages ended the session mixed, with the Nasdaq closing just above the unchanged line. While the Nasdaq edged up 0.18 points or less than a tenth of a percent to 2,933.82, the Dow dipped 34.44 points or 0.3 percent to 12,820.60 and the S&P 500 slid 4.60 points or 0.3 percent to 1,353.39.

Despite the mixed performance on the day, the major averages all moved lower for the week. The Nasdaq fell by 0.8 percent, while the Dow and the S&P 500 dropped by 1.7 percent and 1.1 percent, respectively.

The modestly lower close by the markets came as traders reacted negatively to JP Morgan's revelation of a $2 billion trading loss.

JP Morgan said that since March 31, 2012, its Chief Investment Office has had hefty mark-to-market losses in its synthetic credit portfolio, which proved to be more risky than expected. CEO Jamie Dimon termed the losses "egregious" and "self inflicted."

Traders also kept an eye on the latest developments in Greece, where lawmakers have struggled to form a coalition government and appear poised for a new round of elections.

The negative sentiment was partly offset by a report from Reuters and University of Michigan showing that their consumer sentiment index unexpectedly jumped to a four-year high in May.

The report showed that the consumer sentiment index for May rose to 77.8 from the final April reading of 76.4. The increase came as a surprise to economists, who had expected the index to edge down to 76.2.

With the unexpected increase, the Reuters/University of Michigan consumer sentiment index rose to its highest level since January of 2008.

Meanwhile, traders largely shrugged off a report from the Labor Department showing that a notable decrease in energy prices contributed to an unexpected drop in producer prices in the month of April.

The Labor Department said its producer price index fell by 0.2 percent in April after coming in unchanged in March. Economists had expected the index to remain flat for the second straight month.

Excluding the sharp drop in energy prices as well as a modest increase in food prices, the core producer price index edged up by 0.2 percent in April. The increase in core prices came in line with estimates.

Sector News

With the news from JP Morgan generating negative sentiment, financial stocks saw significant weakness on the day. The KBW Bank Index and the NYSE Arca Broker/Dealer Index ended the day down by 1.2 percent and 1.3 percent, respectively.

Gold stocks also came under considerable selling pressure, moving lower along with the price of the precious metal. With gold for June delivery sliding $11.50 to $1,584 an ounce, the NYSE Arca Gold Bugs Index fell by 1.7 percent.

Natural gas, steel, and oil stocks also saw notable weakness, with the losses by oil stocks coming as the price of crude oil extended a recent downward move.

Meanwhile, biotechnology, airline, and housing stocks saw some strength on the day but ended the session well off their best levels.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved to the downside during trading on Friday. Japan's Nikkei 225 Index ended the day down by 0.6 percent, while Hong Kong's Hang Seng tumbled by 1.3 percent.

Meanwhile, the European markets moved mostly higher over the course of the trading day. The U.K.'s FTSE 100 Index and the German DAX Index rose by 0.6 percent and 1 percent, respectively, while the French CAC 40 Index closed nearly flat.

In the bond market, treasuries moved back to the upside after moving notably lower in the previous session. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, fell by 4.3 basis points to 1.841 percent.

Looking Ahead

While the economic calendar for the past week was relatively light, a slew of economic data is scheduled to be released next week.

Traders are likely to keep a close eye on reports on retail sales, housing starts, industrial production and consumer prices as well as the minutes of the latest Fed meeting.

On the earnings front, retail giants Wal-Mart (WMT) and Home Depot (HD) are among the companies scheduled to release their quarterly results next week.

by RTT Staff Writer

For comments and feedback: editorial@rttnews.com

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