Stocks Regain Ground But Stuck Firmly In The Red - U.S. Commentary

(RTTNews) - After falling sharply early in the session, stocks have regained some ground over the course of the trading day on Friday. The major averages have climbed well off their worst levels of the day but remain firmly in the negative territory.

Currently, the major averages are stuck in the red. The Dow is down 152.99 points or 0.9 percent at 16,521.75, the Nasdaq is down 21.64 points or 0.4 percent at 4,872.31 and the S&P 500 is down 14.07 points or 0.7 percent at 1,976.13.

The initial weakness on Wall Street came as yesterday's Federal Reserve decision to leave interest rates unchanged pointed to continued uncertainty for the markets for at least the next month.

The central bank is still widely expected to raise rates before the end of the year, suggesting an interest rate hike in October or December.

Paul Ashworth, Chief U.S. Economist at Capital Economics, said, "As far as our own forecasts are concerned, we now expect the fed funds rate to end this year at between 0.25% and 0.50% (i.e. just one 25bp hike)."

"But it is not implausible that some other 'risk' will emerge over the next few months (the debt ceiling is the most obvious candidate) that will convince the Fed to delay even longer," he added.

The Fed's comments indicating that recent global economic and financial developments may restrain economic activity somewhat have also generated some negative sentiment.

On the U.S. economic front, the Conference Board released a report showing a slightly smaller than expected increase by its index of leading economic indicators.

The Conference Board said its leading economic index inched up by 0.1 percent in August, while revised data showed no change in July. Economists had expected the index to rise by 0.2 percent.

"The U.S. LEI suggests economic growth will remain moderate into the New Year, with little reason to expect growth to pick up substantially," said Ataman Ozyildirim, Director of Business Cycles and Growth Research at the Conference Board.

Sector News

Many of the major sectors have climbed off their worst levels of the day, although substantial weakness remains visible among energy stocks. The weakness in the energy sector comes as crude oil for October delivery is tumbling $1.56 to $45.34 a barrel.

Within the energy sector, oil service stocks are posting particularly steep losses, resulting in a 3 percent drop by the Philadelphia Oil Service Index.

Financial stocks also continue to see considerable weakness, with the Dow Jones Banks Index and the NYSE Arca Broker/Dealer Index falling by 2 percent and 1.8 percent, respectively.

Steel, computer hardware, and transportation stocks also remain firmly in the red, while some strength has emerged among gold stocks.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved mostly higher on Friday. Hong Kong's Hang Seng Index rose by 0.3 percent, and Australia's All Ordinaries Index climbed by 0.5 percent. However, Japan's Nikkei 225 Index bucked the uptrend and tumbled by 2 percent.

Meanwhile, the major European markets moved notably lower on the day. While the U.K.'s FTSE 100 Index slumped by 1.3 percent, the French CAC 40 Index plunged by 2.6 percent and the German DAX Index plummeted by 3.1 percent.

In the bond market, treasuries have moved to the upside, extending the rally seen following the Fed decision. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, is down by 5.1 basis points at 2.166 percent.