Overseas Concerns Contribute To Early Weakness On Wall Street - U.S. Commentary

(RTTNews) - After ending the previous session modestly lower, stocks have shown a more substantial move to the downside in early trading on Friday. The major averages have slid firmly into negative territory, pulling back well off Wednesday's closing highs.

In recent trading, the major averages have climbed off their lows for the young session, but they continue to post steep losses. The Dow is down 229.27 points or 1.3 percent at 17,876.50, the Nasdaq is down 66.78 points or 1.3 percent at 4,941.01 and the S&P 500 is down 19.40 points or 0.9 percent at 2,085.59.

The early weakness on Wall Street has been attributed to a sell-off in Chinese futures, which fell sharply amid concerns about new trading regulations.

Chinese regulators reportedly expanded the supply of shares available for short sellers while clamping down on over-the-counter margin trading.

The news from China contributed to notable weakness among European stocks, which are also being weighed down by continued worries about Greece.

Meanwhile, traders have largely shrugged off a report from the University of Michigan showing a bigger than expected improvement in U.S. consumer sentiment in the month of April.

The report showed that the preliminary reading on the consumer sentiment index for April came in at 95.9 compared to the final March reading of 93.0. Economists had expected the index to edge up to 94.0.

Before the start of trading, the Labor Department released a separate report showing that consumer prices rose by slightly less than expected in March.

The Labor Department said its consumer price index edged up by 0.2 percent in March, matching the increase seen in February. Economists had expected the index to rise by 0.3 percent.

Core consumer prices, which exclude food and energy prices, rose by 0.2 percent for the third consecutive month. The uptick in core prices matched economist estimates.

While the headline index was down by 0.1 percent compared to a year-ago, the annual rate of core price growth ticked up to 1.8 percent in March from 1.7 percent in February. The core price growth is more closely watched by the Federal Reserve.

Rob Carnell, chief international economist at ING, said, "Given recent activity data weakness, which has seemed to all but rule out a June rate hike, this data adds an additional, but unhelpfully contradictory inflation element to the rate hike timing debate."

"That said, it will need corroboration by activity data soon if it is not to be too late for a June hike, and that point of no return may have already been passed," he added.

Software stocks are turning in some of the market's worst performances in early trading, dragging the Dow Jones Software Index down by 1.8 percent. Check Point (CHKP) and Adobe (ADBE) are posting notable losses.

Considerable weakness has also emerged among housing stocks, which are extending a steep drop seen in the previous session. The Philadelphia Housing Sector Index has fallen by 1.7 percent to its worst intraday level in a month.

Internet, steel, networking, and brokerage stocks are also seeing significant weakness, while gold stocks are among the few groups bucking the downtrend.

In oversea trading, stock markets across the Asia-Pacific region moved mostly lower during trading on Friday. Japan's Nikkei 225 Index slumped by 1.2 percent, while Hong Kong's Hang Seng Index fell by 0.3 percent.

The major European markets have also come under pressure on the day. While the U.K.'s FTSE 100 Index is down by 1 percent, the French CAC 40 Index is down by 1.4 percent and the German DAX Index is down by 2.1 percent.

In the bond market, treasuries are seeing modest weakness after trending higher over the past few sessions. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, is up by 2 basis points at 1.898 percent.