Stocks have moved notably lower in early trading on Friday amid concerns about the impact of automatic government spending cuts. The major averages have all moved to the downside, adding to the modest losses posted in the previous session.
The major averages have recently bounced off their lows for the young session but remain firmly in the red. The Dow is down 79.73 points or 0.6 percent at 13,974.76, the Nasdaq is down 24.35 points or 0.8 percent at 3,135.84 and the S&P 500 is down 9.06 points or 0.6 percent at 1,505.62.
The early weakness on Wall Street comes as approximately $85 billion in automatic cuts to both defense and domestic spending are due to go into effect today due to Washington lawmakers' inability to reach a budget compromise.
While President Barack Obama is scheduled to meet with Congressional leaders from both parties this morning, the so-called sequester is not expected to be averted.
The automatic spending cuts were implemented as part of the Budget Control Act of 2011 in order to push lawmakers to compromise on a broader budget agreement.
Members of both political parties have warned about the economic impact of the cuts, but familiar disagreements over taxes and entitlement reforms have prevented from lawmakers from reaching an agreement to avoid them.
Negative sentiment was also generated by the release of a report from the Commerce Department showing a sharper than expected pullback in personal income in the month of January.
The report said personal income tumbled by 3.6 percent in January after surging up by 2.6 percent in December. Economists had been expecting income to pull back by about 2.1 percent.
At the same time, the Commerce Department said personal spending edged up by 0.2 percent in January after inching up by 0.1 percent in December. The increase in spending matched economists' expectations.
Steel stocks are seeing substantial weakness in early trading, with the NYSE Arca Steel Index down by 2 percent. The loss has pulled the index down to its lowest intraday level in well over two months.
Oil service, semiconductor, and brokerage stocks have also come under pressure, moving lower along with most of the major sectors.
In overseas trading, stock markets across the Asia-Pacific region turned in a mixed performance during trading on Friday. While Japan's Nikkei 225 Index rose by 0.4 percent, Hong Kong's Hang Seng Index ended the day down by 0.6 percent.
Meanwhile, the major European markets have all shown notable moves to the downside on the day. The U.K.'s FTSE 100 Index has dropped by 0.5 percent, while the German DAX Index and the French CAC 40 Index are down by 1 percent and 1.1 percent, respectively.
In the bond market, treasuries have moved moderately higher, adding to the modest gains posted in the previous session. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, is down by 3.7 basis points at 1.851 percent.
by RTT Staff Writer
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