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

(RTTNews) - Extending the steep drop seen over the past few sessions, stocks have moved sharply lower during trading on Friday. With the substantial losses on the day, all three major averages have fallen to new multi-month intraday lows.

In recent trading, the major averages have climbed off their worst levels of the day, but they remain firmly in the red. The Dow is down 226.19 points or 1.3 percent at 16,764.50, the Nasdaq is down 72.87 points or 1.5 percent at 4,804.62 and the S&P 500 is down 27.48 points or 1.4 percent at 2,008.25.

The continued weakness on Wall Street partly reflects the recent downward momentum for the markets, which comes amid overarching concerns about developing economies and the outlook for U.S. interest rates.

Adding to the worries, the Chinese markets showed another steep decline overnight, with the Shanghai Composite Index plunging by 4.3 percent.

The weakness among Chinese stocks came as a report from Markit and Caixin showed that manufacturing activity in China slid to a six-year low in August.

The report said the preliminary reading on Chinese manufacturing activity dropped to 47.1 in August from 47.8 in July.

Markit also released a separate report showing that its preliminary reading on U.S. manufacturing activity came in at 52.9 in August compared to the final July reading of 53.8.

Overall trading activity has remained somewhat subdued on a summer Friday, however, potentially exaggerating the downward move by the markets.

Sector News

While most of the major sectors have moved notably lower on the day, airline stocks have shown a particularly steep drop. The NYSE Arca Airline Index has plunged by 2.7 percent to its lowest intraday level in nearly ten months.

Avianca Holdings (AH) has helped to lead the airline sector lower, with the air transportation services provider currently down by 10.5 percent.

Energy stocks are also seeing substantial weakness in mid-day trading, resulting in a 2.1 percent drop by the NYSE Arca Oil & Gas Index. With the drop, the index has fallen to a three-year low.

The weakness among energy stocks comes amid a steep drop by the price of crude oil, with crude for October delivery tumbling $1.20 to $40.12 a barrel.

Software, retail, trucking, and steel stocks are also seeing considerable weakness on the day, while some electronic storage stocks are bucking the downtrend.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region saw substantial weakness following the overnight sell-off on Wall Street. Japan's Nikkei 225 Index dove by 3 percent, while Hong Kong's Hang Seng Index slumped by 1.5 percent.

The major European markets also moved sharply lower on the day. While the U.K.'s FTSE 100 Index tumbled by 2.8 percent, the German DAX Index and the French CAC 40 Index plummeted by 3 percent and 3.2 percent, respectively.

In the bond market, treasuries are extending a recent uptrend amid the continued weakness on Wall Street. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, is down by 3.9 basis points at 2.045 percent.