Stocks Extend Sell-Off On Disappointing JP Morgan Earnings - U.S. Commentary

(RTTNews) - After moving sharply lower over the course of the previous session, stocks saw some further downside during trading on Friday. Technology stocks helped to lead the way lower once again, with the tech-heavy Nasdaq closing below 4,000 for the first time since early February.

The major averages closed firmly in negative territory, not far off their worst levels of the day. The Dow slid 143.47 points or 0.9 percent to 16,026.75, the Nasdaq dropped 54.37 points or 1.3 percent to 3,999.73 and the S&P 500 fell 17.39 points or 1 percent to 1,815.69.

For the week, the major averages all posted steep losses. The Nasdaq plunged by 3.1 percent, while the Dow and the S&P 500 tumbled by 2.4 percent and 2.6 percent, respectively.

The continued weakness on Wall Street partly reflected a negative reaction to quarterly results from JP Morgan (JPM), with the financial giant falling by 3.7 percent on the day.

The pullback by JP Morgan came after the company reported first quarter earnings that fell year-over-year and came in below analyst estimates. The company also reported weaker than expected revenues for the quarter.

The disappointing results from JP Morgan have added to concerns about the impending earnings season, which will start to pick up steam next week.

Concerns about the valuation of momentum stocks also continued to weigh on the markets after playing a big part in Thursday's sell-off.

Meanwhile, traders largely shrugged off a report from the Labor Department showing that U.S. producer prices rose by much more than expected in the month of March.

The Labor Department said its producer price index for final demand advanced by 0.5 percent in March after edging down by 0.1 percent in February. Economists had been expecting the index to tick up by 0.1 percent.

Core producer prices, which exclude food and energy, also rose by 0.6 percent in March following a 0.2 percent drop in the previous month. Core prices had been expected to rise by 0.2 percent.

Reuters and the University of Michigan released a separate report showing a bigger than expected improvement in consumer sentiment in the month of April.

The report showed that the preliminary reading on the consumer sentiment index for April came in at 82.6 compared to the final March reading of 80.0. Economists had expected the index to inch up to 81.0.

With the bigger than expected increase, Reuters said the consumer sentiment index reached its highest level since last July.

Sector News

Biotechnology stocks once again saw substantial weakness, with the NYSE Arca Biotechnology Index tumbling by 2.6 percent after plummeting by 5.6 percent on Thursday. With the drop, the index fell to a three-month closing low.

Pharmacyclics (PCYC) posted another particularly steep loss on the day, plunging by 7.7 percent to its worst closing level in over nine months.

Significant weakness was also visible among brokerage stocks, as reflected by the 2 percent loss posted by the NYSE Arca Broker/Dealer Index. The index set a nearly five-month closing low amid notable losses by Piper Jaffray (PJC) and Investment Technology Group (ITG).

Airline stocks also saw considerable weakness, dragging the NYSE Arca Airline Index down by 1.9 percent. American Airlines (AAL) and SkyWest (SKYW) turned in two of the sector's worst performances.

Computer hardware, semiconductor, and gold stocks also came under pressure on the day, moving lower along with most of the other major sectors.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved mostly lower on Friday following the overnight sell-off on Wall Street. Japan's Nikkei 225 Index plunged by 2.4 percent, while Hong Kong's Hang Seng Index slumped by 0.8 percent.

The major European markets also came under pressure on the day. While the German DAX Index tumbled by 1.5 percent, the U.K.'s FTSE 100 Index and French CAC 40 Index dropped by 1.2 percent and 1.1 percent, respectively.

In the bond market, treasuries showed a lack of direction throughout the session before closing roughly flat. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, edged down by less than a basis point to 2.619 percent.

Looking Ahead

As mentioned above, earnings season will start to pick up steam next week, with American Express (AXP), Bank of America (BAC), Citigroup (C), Coca-Cola (KO), General Electric (GE), Goldman Sachs (GS), Google (GOOG), IBM (IBM), Intel (INTC) and Yahoo (YHOO) among the companies due to report their quarterly results.

Next week's trading could also be impacted by the release of some key economic data, including reports on retail sales, consumer prices, housing starts, and industrial production.