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Stocks Continue To See Substantial Weakness In Mid-Day Trading - U.S. Commentary

wallstreet 112414 17Apr15

After moving sharply lower earlier in the session, stocks continue to see substantial weakness in mid-day trading on Friday. With the sell-off on the day, the markets have partly offset the upward move seen over the past two weeks.

The major averages have moved roughly sideways in recent trading, stuck firmly in negative territory. The Dow is down 238.56 points or 1.3 percent at 17,867.21, the Nasdaq is down 69.67 points or 1.4 percent at 4,938.12 and the S&P 500 is down 20.62 points or 1 percent at 2,084.37.

The weakness on Wall Street has been attributed to a sell-off in Chinese futures, which fell sharply amid concerns about new trading regulations.

Chinese regulators reportedly expanded the supply of shares available for short sellers while clamping down on over-the-counter margin trading.

The news from China contributed to notable weakness among European stocks, which were also weighed down by continued worries about Greece.

Meanwhile, traders have largely shrugged off a report from the University of Michigan showing a bigger than expected improvement in U.S. consumer sentiment in the month of April.

The report showed that the preliminary reading on the consumer sentiment index for April came in at 95.9 compared to the final March reading of 93.0. Economists had expected the index to edge up to 94.0.

Before the start of trading, the Labor Department released a separate report showing that consumer prices rose by slightly less than expected in March.

The Labor Department said its consumer price index edged up by 0.2 percent in March, matching the increase seen in February. Economists had expected the index to rise by 0.3 percent.

Core consumer prices, which exclude food and energy prices, rose by 0.2 percent for the third consecutive month. The uptick in core prices matched economist estimates.

While the headline index was down by 0.1 percent compared to a year-ago, the annual rate of core price growth ticked up to 1.8 percent in March from 1.7 percent in February. The core price growth is more closely watched by the Federal Reserve.

Rob Carnell, chief international economist at ING, said, "Given recent activity data weakness, which has seemed to all but rule out a June rate hike, this data adds an additional, but unhelpfully contradictory inflation element to the rate hike timing debate."

"That said, it will need corroboration by activity data soon if it is not to be too late for a June hike, and that point of no return may have already been passed," he added.

Sector News

Software stocks continue to see substantial weakness in mid-day trading, with the Dow Jones Software Index down by 1.9 percent. Despite the drop, the index remains stuck in a recent trading range.

Check Point (CHKP) and Adobe (ADBE) are turning in two of the software sector's worst performances, falling by 3.1 percent and 2.7 percent, respectively.

Significant weakness also remains visible among networking stocks, as reflected by the 1.8 percent loss being posted by the NYSE Arca Networking Index. With the drop, the index is pulling back further off the record closing high it set on Tuesday.

Most of the other major sectors are also seeing considerable weakness on the day, with internet, steel, brokerage, and biotech stocks showing notable moves to the downside.

Other Markets

In oversea trading, stock markets across the Asia-Pacific region moved mostly lower during trading on Friday. Japan's Nikkei 225 Index slumped by 1.2 percent, while Hong Kong's Hang Seng Index fell by 0.3 percent.

The major European markets also came under pressure on the day. While the U.K.'s FTSE 100 Index dropped by 0.9 percent, the French CAC 40 Index tumbled by 1.6 percent and the German DAX Index plummeted by 2.6 percent.

In the bond market, treasuries are seeing modest weakness after trending higher over the past few sessions. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, is up by 1.2 basis points at 1.89 percent.

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