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Stocks Pulling Back Sharply On Economic Concerns - U.S. Commentary


Stocks have moved sharply lower in morning trading on Friday, giving back ground following the rally seen in the previous session. The major averages moved lower at the open and have seen further downside since then.

In recent trading, the Nasdaq and the S&P 500 have fallen to new lows for the session. The Dow is down 271.15 points or 1 percent at 25,691.36, the Nasdaq is down 92.70 points or 1.2 percent at 7,746.26 and the S&P 500 is down 30.03 points or 1.1 percent at 2,824.85.

The pullback on Wall Street may partly reflect profit taking, with traders cashing in on recent gains after yesterday's strong upward move lifted the Nasdaq and the S&P 500 to new five-month closing highs.

Lingering uncertainty about trade talks between the U.S. and China may are also weighing on the markets ahead of another round of high-level negotiations next week.

Meanwhile, traders continue to digest the Federal Reserve's dovish monetary policy announcement earlier in the week.

The Fed's decision to move away from plans to continue raising interest rates this year has been described by some analysts as an effort to keep the stock markets afloat amid an expected contraction in first quarter earnings.

The central bank has also been accused of bending to pressure from President Donald Trump, who has claimed U.S. economic growth would be even stronger if the Fed had not raised rates last year.

Chairman Jerome Powell has continually touted the Fed's independence, however, suggesting the dovish tone could also reflect legitimate concerns about the economic outlook.

Adding to the concerns about the outlook for the economy, the yield on the benchmark ten-year note has fallen below the yield on the three-month bond, which is seen by many as a reliable harbinger of a recession.

Meanwhile, traders have largely shrugged off a report from the National Association of Realtors showing a substantial rebound in existing home sales in the month of February.

NAR said existing home sales soared by 11.8 percent to an annual rate of 5.51 million in February after slumping by 1.4 percent to a revised rate of 4.93 million in January.

Economists had expected existing home sales to surge up by 3.2 percent to a rate of 5.10 million from the 4.94 million originally reported for the previous month.

Oil service stocks have shown a substantial move to the downside in morning trading, dragging the Philadelphia Oil Service Index down by 4 percent.

The sell-off by oil services stocks comes amid a notable decrease by the price of crude oil, with crude for April delivery slumping $0.91 to $59.07 a barrel.

Considerable weakness has also emerged among banking stocks, which are extending a recent sell-off. The KBW Bank Index is plunging by 3.1 percent to its lowest intraday level in over two months.

Steel, brokerage, and chemical stocks are also seeing significant weakness, moving lower along with most of the other major sectors.

In overseas trading, stock markets across the Asia-Pacific region moved slightly higher during trading on Friday. Japan's Nikkei 225 Index, China's Shanghai Composite Index and Hong Kong's Hang Seng Index all inched up by 0.1 percent.

Meanwhile, the major European markets have shown significant moves to the downside on the day. While the German DAX Index has slid by 0.8 percent, the French CAC 40 Index and the U.K.'s FTSE 100 Index have tumbled by 1.5 percent and 1.6 percent, respectively.

In the bond market, treasuries have moved notably higher after ending the previous session roughly flat. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, is down by 9.3 basis points at 2.444 percent.

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