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U.S. Stocks Remain Sharply Lower In Afternoon Trading

wallstreet oct26 16sep22 lt

Stocks moved sharply lower early in the session on Friday and continue to see substantial weakness in afternoon trading. The major averages are adding to the losses posted in the previous session, falling to their lowest levels in two months.

The major averages have moved roughly sideways in recent trading, stuck firmly in negative territory. The Dow is down 362.73 points or 1.2 percent at 30,599.09, the Nasdaq is down 210.30 points or 1.8 percent at 11,342.06 and the S&P 500 is down 58.81 points or 1.5 percent at 3,842.54.

A steep drop by shares of FedEx (FDX) has contributed to the weakness on Wall Street, with the delivery giant plunging by 21.8 percent.

The sell-off by FedEx comes after the company reported weaker than expected preliminary fiscal first quarter results and withdrew its full-year guidance.

FedEx cited global volume softness and expectations for a continued volatile operating environment and warned it expects business conditions to further weaken in the second quarter.

The warning from FedEx has added to concerns about the outlook for the global economy amid monetary policy tightening by central banks around the world.

Concerns about the outlook for interest rates also continue to weigh on the markets ahead of the Federal Reserve's monetary policy decision next week.

The Fed is widely expected to raise interest rates by another 75 basis points, although some see an outside chance for a 100 basis point rate hike.

Meanwhile, traders have largely shrugged off a report from the University of Michigan showing a modest improvement in consumer sentiment and a decrease in inflation expectations.

The University of Michigan said its consumer sentiment index inched up to 59.5 in September from 58.2 in August. With the uptick, the consumer sentiment index reached its highest level since hitting 65.2 in April.

The report also showed the recent decline in energy prices has contributed to a decrease in inflation expectations.

One-year inflation expectations dipped to 4.6 percent in September from 4.8 percent in August, while five-year inflation expectations edged down to 2.8 percent from 2.9 percent.

The Fed has indicated that its aggressive monetary policy tightening partly reflects a desire to prevent elevated inflation expectations from becoming entrenched.

Sector News

Transportation stocks continue to see substantial weakness amid the steep drop by FedEx, with the Dow Jones Transportation Average plummeting by 5.9 percent.

Significant weakness also remains visible among oil service stocks, as reflected by the 4.8 percent plunge by the Philadelphia Oil Service Index. The sell-off by oil service stocks comes despite a modest increase by the price of crude oil.

Natural gas stocks are also seeing considerable weakness amid a pullback by the price of natural gas, dragging the NYSE Arca Natural Gas Index down by 3.8 percent.

Financial, chemical and networking stocks have also shown notable moves to the downside amid broad based weakness on Wall Street.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved mostly lower during trading on Friday. Japan's Nikkei 225 Index slumped by 1.1 percent, while China's Shanghai Composite Index plunged by 2.3 percent.

The major European markets also moved to the downside on the day. While the German DAX Index dove by 1.7 percent, the French CAC 40 Index tumbled by 1.3 percent and the U.K.'s FTSE 100 Index slid by 0.6 percent.

In the bond market, treasuries have shown a lack of direction over the course of the session. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, is down by just 1 basis point at 3.449 percent.

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