U.S. Stocks Come Under Pressure After Seeing Initial Strength

wallstreet3 061318 18jan23 lt

After failing to sustain an initial move to the upside, stocks have shown a notable downturn over the course of trading on Wednesday. The major averages have pulled back well off their highs of the session and into negative territory.

Currently, the major averages are just off their worst levels of the day. The Dow is down 290.47 points or 0.9 percent at 33,620.38, the Nasdaq is down 44.97 points or 0.4 percent at 11,050.14 and the S&P 500 is down 21.85 points or 0.6 percent at 3,969.12.

The downturn on Wall Street comes as traders digest a slew of U.S. economic data, including a Commerce Department report showing a steep drop in U.S. retail sales in the month of December.

The Commerce Department said retail sales tumbled by 1.1 percent in December after slumping by a revised 1.0 percent in November.

Economists had expected retail sales to decrease by 0.8 percent compared to the 0.6 percent drop originally reported for the previous month.

Andrew Hunter, Senior US Economist at Capital Economics, said the steep drop in retail sales "adds to the evidence from the surveys that the economy was rapidly losing momentum towards the end of last year."

"Although GDP growth still looks to have held up over the fourth quarter as a whole, we continue to expect the economy to fall into recession in the first half of this year," Hunter added.

A separate report released by the Federal Reserve showing industrial production in the U.S. decreased by much more than expected in the month of December.

The Fed said industrial production slid by 0.7 percent in December after falling by a revised 0.6 percent in November. Economists had expected industrial production to edge down by 0.1 percent compared to the 0.2 percent dip originally reported for the previous month.

Meanwhile, the initial strength on Wall Street came after a report from the Labor Department showed U.S. producer prices fell by more than expected in the month of December.

The Labor Department said its producer price index for final demand declined by 0.5 percent in December after inching up by a revised 0.2 percent in November.

Economists had expected producer prices to edge down by 0.1 percent compared to the 0.3 percent increase originally reported for the previous month.

The report also showed the annual rate of producer price growth slowed to 6.2 percent in December from 7.3 percent in November. The year-over-year growth was expected to slow to 6.8 percent.

Sector News

Banking stocks have come under pressure over the course of the session, dragging the KBW Bank Index down by 1.7 percent.

Considerable weakness has also emerged among utilities stocks, as reflected by the 1.3 percent drop by the Dow Jones Utility Average.

Tobacco and telecom stocks are also seeing notable weakness, while strength remains visible among steel, oil and transportation stocks.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved mostly higher during trading on Wednesday. Japan's Nikkei 225 Index surged by 2.5 percent, while Hong Kong's Hang Seng Index rose by 0.5 percent.

Meanwhile, the major European markets are turning in a mixed performance on the day. While the U.K.'s FTSE 100 Index is down by 0.3 percent, the German DAX Index just above the unchanged line and the French CAC 40 Index is up by 0.2 percent.

In the bond market, treasuries continue to see significant strength after an early rally. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, is down by 12.0 basis points at 3.415 percent.

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