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Renewed Interest Rate Concerns Weighing On Wall Street - U.S. Commentary


Stocks have moved mostly lower in morning trading on Friday following the mixed performance seen in the previous session. The major averages have all moved to the downside, with the Dow pulling back off its best closing level in a month.

Currently, the major averages are off their lows of the session but stuck in the red. The Dow is down 148.46 points or 0.6 percent at 26,042.76, the Nasdaq is down 107.22 points or 1.4 percent at 7,423.66 and the S&P 500 is down 22.80 points or 0.8 percent at 2,784.03.

The weakness on Wall Street partly reflects renewed concerns about the outlook for interest rates on the heels of the Federal Reserve's monetary policy announcement on Thursday.

The Fed left interest rates unchanged as widely expected but indicated it remains on track to gradually raise rates despite signs of a slowdown in the pace of growth in business investment.

Potentially adding to the concerns about interest rates, the Labor Department released a report showing a much bigger than expected increase in producer prices in the month of October.

The Labor Department said its producer price index for final demand climbed by 0.6 percent in October after rising by 0.2 percent in September. Economists had been expecting another 0.2 percent uptick.

Excluding food and energy prices, core producer prices still rose by 0.5 percent in October after edging up by 0.2 percent in September. Core prices had been expected to rise by another 0.2 percent.

Compared to the same month a year ago, producer prices in October were up by 2.9 percent, reflecting an acceleration from the 2.6 percent increase in September.

The annual rate of growth in core consumer prices also accelerated modestly to 2.6 percent in October from 2.5 percent in September.

"Overall, the producer prices data show that inflationary pressures remain fairly strong, which will keep the Fed hiking rates once a quarter in the near term," said Andrew Hunter, U.S. Economist at Capital Economics.

A separate report from the University of Michigan showed a slight deterioration in consumer sentiment in the month of November.

The report said the consumer sentiment index edged down to 98.3 in November from the final October reading of 98.6. Economists had expected the index to dip to 98.0.

Steel stocks have shown a substantial move to the downside amid concerns about global demand, dragging the NYSE Arca Steel Index down by 3 percent.

Considerable weakness is also visible among oil service stocks, as reflected by the 2.1 percent slump by the Philadelphia Oil Service Index. The weakness in the sector comes as the price of crude oil has fallen below $60 a barrel.

Gold, semiconductor, biotechnology and software stocks are also seeing notable weakness, moving lower along with most of the other major sectors.

In overseas trading, stock markets across the Asia-Pacific region moved notably lower during trading on Friday. Japan's Nikkei 225 Index slumped by 1.1 percent, while Hong Kong's Hang Seng Index plunged by 2.4 percent.

The major European markets have also moved to the downside on the day. While the German DAX Index has slipped by 0.2 percent, the French CAC 40 Index and the U.K.'s FTSE 100 Index are down by 0.8 percent and 0.9 percent, respectively.

In the bond market, treasuries are rebounding following the drop seen over the course of the previous session. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, is down by 3 basis points at 3.204 percent.

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