U.S. Stocks Regain Ground After Early Sell-Off But Close Firmly Negative

(RTTNews) - After moving sharply lower early in the session, stocks regained some ground over the course of the trading day on Friday but remained firmly in negative territory. With the drop, the Dow and the Nasdaq pulled back further off the record intraday highs set in early trading on Thursday.

The Dow ended the day down 117.26 points or 0.6 percent at 30,814.26 after tumbling by nearly 380 points in early trading. The Nasdaq slumped 114.14 points or 0.9 percent to 12,998.50 and the S&P 500 slid 27.29 points or 0.7 percent to 3,768.25.

The major averages also moved to the downside for the week, with the Dow falling by 0.9 percent, while the Nasdaq and the S&P 500 both dropped by 1.5 percent.

The early sell-off on Wall Street partly reflected a negative reaction to earnings news from financial giants Wells Fargo (WFC), Citigroup (C) and JPMorgan Chase (JPM).

Wells Fargo and Citigroup posted steep losses after both reported better than expected fourth quarter earnings but on revenues that missed estimates.

Shares of JPMorgan also moved notably lower even though the company reported fourth quarter results that beat expectations on both the top and bottom lines.

JPMorgan benefited from the release of money previously set aside for expected loan defaults, although its earnings would have still beat estimates with the boost.

Negative sentiment was also generated in reaction to a report from the Commerce Department showing a continued decline in U.S. retail sales in the month of December.

The Commerce Department said retail sales fell by 0.7 percent in December after tumbling by a revised 1.4 percent in November.

Economists had expected retail sales to come in unchanged compared to the 1.1 percent slump originally reported for the previous month.

Excluding sales by motor vehicle and parts dealers, retail sales plunged by 1.4 percent in December after sliding by 1.3 percent in November.

Ex-auto sales were expected to edge down by 0.1 percent compared to the 0.9 percent decrease originally reported for the previous month.

"The further slump in retail sales in December confirms that the continued surge in coronavirus infections is now weighing heavily on the economy," said Andrew Hunter, Senior U.S. Economist at Capital Economics. "Despite the building optimism over fiscal stimulus, the next few months are still likely to be difficult."

Meanwhile, the Federal Reserve released a separate report showing U.S. industrial production jumped by much more than expected in the month of December.

The Fed said industrial production surged up by 1.6 percent in December after climbing by an upwardly revised 0.5 percent in November.

Economists had expected production to rise by 0.4 percent, matching the increase originally reported for the previous month.

"The December production data underline that while new restrictions are holding back parts of the service sector again, the recovery in manufacturing continues largely unaffected," said Michael Pearce, Senior U.S. Economist at Capital Economics.

The weakness on Wall Street may also have reflected the old adage of "sell the news" after President-elect Joe Biden announced a $1.9 trillion coronavirus relief package on Thursday.

The proposed stimulus package includes an increase in direct payments to individuals, increased federal unemployment benefits and aid to state and local governments.

Sector News

Steel stocks showed a substantial move to the downside on the day, resulting in a 4.8 percent nosedive by the NYSE Arca Steel Index.

Considerable weakness was also visible among energy stocks, which pulled back along with the price of crude oil. Crude for February delivery tumbled $1.21 to $52.36 a barrel after reaching an eleven-month high on Thursday.

Reflecting the weakness in the energy sector, the Philadelphia Oil Service Index and the NYSE Arca Oil Index plunged by 4.3 percent and 4.2 percent, respectively.

Airline stocks also moved sharply lower following the rally seen in the previous session, with the NYSE Arca Airline Index slumping by 4.2 percent after ending Thursday's trading at its best closing level in a month.

Gold, banking and semiconductor stocks also showed notable moves to the downside, while some strength emerged among interest rate-sensitive utilities and commercial real estate stocks.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region turned in a mixed performance during trading on Friday. Japan's Nikkei 225 Index slid by 0.6 percent, while Hong Kong's Hang Seng Index rose by 0.3 percent.

Meanwhile, the major European markets all showed significant moves to the downside on the day. While the U.K.'s FTSE 100 Index slumped by 1 percent, the French CAC 40 Index and the German DAX Index tumbled by 1.2 percent and 1.4 percent, respectively.

In the bond market, treasuries moved higher in reaction to the disappointing retail sales data. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, fell by 3.2 basis points to 1.097 percent.

Looking Ahead

Following the long weekend, earnings season will start to pick up steam next week, with Bank of America (BAC), Goldman Sachs (GS), Netflix (NFLX), Procter & Gamble (PG), IBM (IBM), Intel and (INTC) among the companies scheduled to release their quarterly results.

Traders are also likely to keep an eye on the latest economic data, including reports on homebuilder confidence, housing starts, and existing home sales.