Stocks Remain Mostly Negative Amid Interest Rate Worries - U.S. Commentary

(RTTNews) - After coming under pressure early in the session, stocks remain mostly negative in mid-day trading on Friday. The losses on the day come after the major averages ended the previous session near the unchanged line.

Currently, the major averages remain firmly in negative territory. The Dow is down 51.45 points or 0.3 percent at 16,997.55, the Nasdaq is down 17.40 points or 0.4 percent at 4,574.41 and the S&P 500 is down 8.44 points or 0.4 percent at 1,989.01.

Concerns about the outlook for interest rate seem to be weighing on the markets following the release of upbeat retail sales data.

The Commerce Department released a report before the start of trading showing that U.S. retail sales rose by 0.6 percent in the month of August, in line with economist estimates.

The report also showed a notable upward revision to the data for July, with sales rising by 0.3 percent after originally being reported as virtually unchanged.

Paul Dales, Senior U.S. Economist at Capital Economics, said the August sales growth combined with the upwardly revised July data suggests that annualized real consumption growth in the third quarter will come in between 1.5 and 2.0 percent, a bit stronger than previously expected.

Thomson Reuters and the University of Michigan also released a report showing a much bigger than expected improvement in consumer sentiment in the month of September.

The data has added to speculation that the Federal Reserve may begin raising rates sooner than anticipated, with traders looking ahead to next week's monetary policy meeting.

The Fed is expected to announce a further reduction in the pace of its asset purchases, although traders are likely to pay closer attention to any clues about the outlook for rates.

Earlier this week, analysts repeatedly pointed to a report from the San Francisco Fed that said the public seems to expect more accommodative monetary policy than the central bank's projections suggest.

The public also appears to be less uncertain about the future course of monetary policy than FOMC participants, the San Francisco Fed said.

Sector News

Reflecting the worries about higher interest rates, commercial real estate stocks are turning in some of the market's worst performances on the day. The Morgan Stanley REIT Index has fallen by 2.1 percent to its lowest intraday level in a month.

Health Care REIT (HCN) is leading the sector lower after pricing an underwritten public offering of 15.5 million shares of common stock at $63.75 per share.

Considerable weakness is also visible among oil service stocks, as reflected by the 1.7 percent loss being posted by the Philadelphia Oil Service Index. The weakness in the sector comes amid a modest decrease by the price of crude oil.

Housing stocks have also come under pressure over the course of the session, dragging the Philadelphia Housing Sector Index down by 1.3 percent. M/I Homes (MHO) and MDC Holdings (MDC) are posting notable losses.

Utilities, gold, and natural gas stocks are also seeing significant weakness 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 turned in another mixed performance during trading on Friday. Japan's Nikkei 225 Index rose by 0.3 percent, while Hong Kong's Hang Seng Index dipped by 0.3 percent.

The major European markets also ended the day mixed. While the German DAX Index fell by 0.4 percent, the U.K.'s FTSE 100 Index edged up by 0.1 percent and the French CAC 40 Index closed just above the unchanged line.

In the bond market, treasuries have moved sharply lower on the heels of the upbeat retail sales data. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, is up by 6.3 basis points at 2.594 percent.