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Stocks Remain Firmly Negative After Initial Sell-Off - U.S. Commentary


After falling sharply at the start of trading on Friday, stocks have remained firmly negative over the course of the morning. The major averages have all moved to the downside after ending the previous session mixed.

In recent trading, the Dow and the S&P 500 fell to new lows for the session. The Dow is down 291.73 points or 1.2 percent at 24,305.65, the Nasdaq is down 72.74 points or 1 percent at 6,997.59 and the S&P 500 is down 27.39 points or 1 percent at 2,623.15.

Renewed concerns about the outlook for global economic growth contributed to the initial weakness on Wall Street following the release of data showing disappointing industrial output and retail sales growth in China.

The latest batch of economic data showed Chinese industrial output grew at its slowest pace in nearly three years, increasing by 5.4 percent in November after growing by 5.9 percent a month earlier.

Meanwhile, retail sales in China grew 8.1 percent in November, the weakest growth since 2003. In October, retail sales were up 8.6 percent.

The slower pace of industrial output and retail sales growth was partly due to the impact of the ongoing trade dispute with the U.S.

A report showing growth in the eurozone private sector has decelerated to its slowest pace in more than four years in December added to the negative sentiment.

On the U.S. economic front, the Commerce Department released a report showing slightly weaker than expected retail sales growth in November due to a steep drop in sales by gas stations, although underlying retail sales growth remained strong.

The Commerce Department said retail sales edged up by 0.2 percent in November after spiking by an upwardly revised 1.1 percent in October.

Economists had expected retail sales to rise by 0.3 percent compared to the 0.8 percent increase originally reported for the previous month.

Meanwhile, the report said closely watched core retail sales, which exclude autos, gasoline, building materials and food services, increased by 0.9 percent in November after climbing by an upwardly revised 0.7 percent in October.

"Along with the continued strength of the labor market, the boost to real incomes from the recent plunge in gasoline prices appears to be providing a big support to spending growth, which could continue for a few more months," said Andrew Hunter, Senior U.S. Economist at Capital Economics.

He added, "Nonetheless, with the earlier boost from tax cuts now fading and rising interest rates likely to become an increasing drag, we still expect consumption growth to slow next year."

A separate report from the Federal Reserve showed a much bigger than expected increase in industrial production in November, although manufacturing output was unchanged.

Pharmaceutical stocks are turning in some of the market's worst performances in morning trading, resulting in a 2.percent slump by the NYSE Arca Pharmaceutical Index.

Johnson & Johnson (JNJ) is posting a steep loss after a report from Reuters said the healthcare giant knew for decades that its talcum baby powder supply contained asbestos.

Gold, oil service, and natural gas stocks are also seeing considerable weakness amid decreases in the prices of their associated commodities.

In overseas trading, stock markets across the Asia-Pacific region moved notably lower during trading on Friday. Japan's Nikkei 225 Index plunged by 2 percent, while Hong Kong's Hang Seng Index tumbled by 1.6 percent.

Meanwhile, European stocks have climbed off their worst levels of the day but remain negative. While the French CAC 40 Index is down by 0.6 percent, the U.K.'s FTSE 100 Index and the German DAX Index are both down by 0.2 percent.

In the bond market, treasuries are seeing modest strength after ending the previous session roughly flat. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, is down by 2.3 basis points at 2.888 percent.

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