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Stocks Seeing Further Downside In Mid-Day Trading - U.S. Commentary


After moving notably lower early in the session, stocks have seen some further downside over the course of the trading day on Friday. The major averages have slid firmly into negative territory, with the Dow pulling back off its best closing level in a month.

Currently, the major averages are lingering near their worst levels of the day. The Dow is down 225.96 points or 0.9 percent at 25,965.26, the Nasdaq is down 113.37 points or 1.8 percent at 7,397.51 and the S&P 500 is down 30.85 points or 1.1 percent at 2,775.98.

The sell-off 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.

Sector News

Steel stocks continue to turn in some of the market's worst performances on the day amid concerns about the outlook for global demand. Reflecting the weakness in the sector, the NYSE Arca Steel Index has plummeted by 3.5 percent.

Considerable weakness has also emerged among biotechnology stocks, as reflected by the 2.4 percent slump by the NYSE Arca Biotechnology Index.

Gold stocks are also seeing significant weakness amid a steep drop by the price of the precious metal. With gold for December delivery tumbling $16 to $1,209.10 an ounce, the NYSE Arca Gold Bugs Index is down by 2.3 percent.

Computer hardware, semiconductor, software, and chemical stocks have also shown notable moves to the downside, moving lower along with most of the other major sectors.

Other Markets

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.

European stocks also moved mostly lower on the day. While the German DAX Index bucked the downtrend and closed just above the unchanged line, the French CAC 40 Index and the U.K.'s FTSE 100 Index both fell by 0.5 percent.

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 5.2 basis points at 3.182 percent.

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