Stocks Move To The Downside After Early Buying Interest Fades - U.S. Commentary

(RTTNews) - After failing to sustain an initial upward move, stocks moved back to the downside over the course of the trading day on Friday. The major averages all pulled back into negative territory, with the S&P 500 turning lower after reaching a record intraday high.

While the major averages all ended the day in the red, the tech-heavy Nasdaq underperformed its counterparts. The Nasdaq tumbled 42.50 points or 1 percent to 4,276.79, while the Dow edged down 28.35 points or 0.2 percent to 16,302.70 and the S&P 500 dipped 5.61 points or 0.3 percent at 1,866.40.

Despite the losses on the day, the major averages all moved higher for the week. The Nasdaq advanced by 0.7 percent, and the Dow and the S&P 500 jumped by 1.5 percent and 1.4 percent, respectively.

The pullback seen over the course of the session was attributed to concerns about the possibility of further developments in the Ukraine crisis over the weekend.

Traders may also have been expressing uncertainty about whether the current state of the economy supports any further upside for the markets.

Recent data suggests that the economy is poised to break out of the winter doldrums, but investors may wait for additional evidence before buying in.

On Thursday, traders reacted positively to a report from the Conference Board showing a bigger than expected increase by its index of leading economic indicators as well as a report from the Philadelphia Federal Reserve showing a significant turnaround in regional manufacturing activity.

The positive data helped to overshadow concerns that the Fed may begin raising interest rate sooner than previously anticipated.

New Fed Chair Janet Yellen's remarks in her post-meeting press conference on Wednesday seemed to suggest that the central bank could begin raising rates by mid-2015.

While the mid-2015 guidance is in line with the forecasts of many economists, traders still need to come to terms with the reality that the Fed's easy monetary policy will not last forever.

Meanwhile, Minneapolis Fed President Narayana Kocherlakota released a statement this morning explaining his dissenting vote at Wednesday's Fed meeting.

Kocherlakota said he wanted the Fed's statement to include language indicating that the central bank would keep rates at near-zero levels at least until the unemployment rate has fallen below 5.5 percent.

Sector News

Biotechnology stocks showed a substantial move to the downside over the course of the trading day, dragging the NYSE Arca Biotechnology Index down by 3.9 percent. With the steep drop, the index ended the session at its lowest closing level in a month.

The weakness among biotech stocks was partly due to concerns about the outlook for drug prices amid news that lawmakers are asking Gilead Sciences (GILD) to justify the $84,000 price for its hepatitis C treatment Sovaldi.

Significant weakness also emerged among software stocks, which turned lower after seeing initial strength. The Dow Jones Software Index ended the day down by 1.7 percent after reaching a thirteen-year intraday high in early trading.

Airline, housing, and brokerage stocks also came under pressure on the day, while notable strength was visible among steel, tobacco, and oil service stocks.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved mostly higher during trading on Friday. Hong Kong's Hang Seng Index advanced by 1.2 percent, while China's Shanghai Composite Index surged up by 2.7 percent. The Japanese markets were closed for a public holiday.

The major European markets also moved to the upside on the day. While the German DAX Index rose by 0.5 percent, the French CAC 40 Index and the U.K.'s FTSE 100 Index both edged up by 0.2 percent.

In the bond market, treasuries moved modestly higher after ending the previous session nearly flat. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, fell by 2.5 basis points to 2.75 percent.

Looking Ahead

Next week's trading could be impacted by some key economic data, including reports on new home sales, durable goods orders, and personal income and spending.