Stocks Close Mostly Lower Amid Profit Taking - U.S. Commentary

(RTTNews) - Stocks moved mostly lower over the course of the trading day on Friday, as traders cashed in on some of the recent gains. Renewed concerns about the outlook for the Federal Reserve's stimulus program and worries about a potential government shutdown weighed on the markets.

The major averages saw further downside going into the close, ending the session near their worst levels of the day. The Dow tumbled 185.46 points or 1.2 percent to 15,451.09, the Nasdaq fell 14.66 points or 0.4 percent to 3,774.73 and the S&P 500 slid 12.43 points or 0.7 percent to 1,709.91.

Despite the losses on the day, the major averages all moved higher for the week. The Dow rose by 0.5 percent, while the Nasdaq and the S&P 500 advanced by 1.4 percent and 1.3 percent, respectively.

Profit taking contributed to some of the weakness on Wall Street, with the Dow and the S&P 500 pulling back further off the record closing highs set on Wednesday.

Traders also seemed to quickly put the Fed's surprise decision to refrain from tapering its asset purchases in the rear-view mirror following remarks from several Fed officials.

Ahead of a speech on monetary policy to the New York Association for Business Economics, St. Louis Fed President James Bullard told Bloomberg News that the decision to hold off on tapering was a "borderline" call that reflected weaker data.

Bullard said the Fed's next meeting in late October would be a "live meeting," noting that "it's possible you could get some data that change the complexion of the outlook and could make the committee be comfortable with a small taper in October."

Kansas City Fed President Esther George, who voted against the recent Fed decision, also delivered remarks before the Shadow Open Market Committee in New York.

Noting that the markets were prepared for tapering, George argued that Fed signals without follow-through erode the intent of policy and threaten to hurt the central bank's credibility.

"Clearly the actions at this meeting, and the expectations that had been set relative to how markets were thinking about this, created confusion, created a disconnect," George said.

Negative sentiment was also generated by news that the House passed a temporary spending bill that keeps the federal government running but defunds President Barack Obama's healthcare reform law.

The bill passed the Republican-controlled House by a vote of 230 to 189, but the Democratic-controlled Senate is likely to reject the language cutting off funding for Obamacare.

The standoff over Obamacare could result in a government shutdown if a new continuing resolution is not passed before funding runs out at the end of the month.

Sector News

Gold stocks showed a substantial move to the downside over the course of the trading day, dragging the NYSE Arca Gold Bugs Index down by 6.3 percent. The index continued to give back ground after surging up by nearly 10 percent on Wednesday.

A notable pullback by the price of gold weighed on the sector, with gold for December delivery falling $36.80 to $1,332.50 an ounce after jumping more than $60 an ounce in the previous session.

Considerable weakness also emerged among housing stocks, as reflected by the 2.1 percent loss posted by the Philadelphia Housing Sector Index. With the loss, the index pulled back further off Wednesday's three-month closing high.

Steel stocks also came under pressure on the day, resulting in a 2 percent drop by the NYSE Arca Steel Index. AK Steel (AKS) helped to lead the sector lower after forecasting a wider than expected third quarter loss.

Commercial real estate, defense, and oil service stocks also saw significant weakness, moving to the downside along with most of the other major sectors.

Other Markets

In overseas trading, stocks markets across the Asia-Pacific region moved mostly lower on Friday, although several markets were closed for public holidays. Japan's Nikkei 225 Index edged down by 0.2 percent, while Australia's All Ordinaries Index dipped by 0.3 percent.

The major European markets also moved modestly lower on the day. The U.K.'s FTSE 100 Index fell by 0.4 percent, while the German DAX Index and the French CAC 40 Index slipped by 0.2 percent and 0.1 percent, respectively.

In the bond market, treasuries showed a modest move back to the upside after ending the previous session firmly in the red. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, dipped by 1.6 basis points to 2.732 percent.

Looking Ahead

In light of the Fed's remarks highlighting the importance of incoming economic data, next week's trading may be driven by reaction to a batch of reports on durable goods orders, new home sales, and personal income and spending.