Stocks Seeing Substantial Weakness In Mid-Day Trading - U.S. Commentary

(RTTNews) - After coming under pressure in early trading on Friday, stocks have seen some further downside over the course of the trading day. The losses on the day have more than offset the moderate strength seen in the previous session.

Currently, the major averages remain firmly in negative territory. The Dow is down 235.17 points or 1.3 percent at 17,361.17, the Nasdaq is down 29.74 points or 0.6 percent at 4,678.42 and the S&P 500 is down 22.44 points or 1.1 percent at 2,012.89.

The weakness on Wall Street is partly due to a continued decrease by the price of crude oil, with crude for January delivery plummeting $2.31 to $57.64 a barrel after ending the previous session below $60 a barrel for the first time in over five years.

Concerns about oil demand are contributing to the continued decline after the International Energy Agency cut its outlook for 2015 global oil demand growth by 230 000 barrels per day to 0.9 million barrels per day.

The recent sell-off by the price of crude oil has led to some worries about how the drop in prices will affect the U.S. economy as a whole.

While lower gas prices may boost consumer spending in other areas, the drop in prices will hurt the oil and gas industry, which had been a major source of growth.

Negative sentiment has also been generated by disappointing Chinese data, which has added to recent worries about the outlook for the global economy.

A report released by the Chinese National Bureau of Statistics showed that industrial production rose 7.2 percent year-over-year in November, slower than the 7.7 percent growth in October and the 7.5 percent growth expected by economists.

Meanwhile, traders have largely shrugged off a report from Thomson Reuters and the University of Michigan showing a bigger than expected jump in consumer sentiment.

The report said the preliminary reading on the consumer sentiment index for December came in at 93.8 compared to the final November reading of 88.8. Economists had expected the index to show a more modest increase to 89.5.

With the much bigger than expected increase, the consumer sentiment index reached its highest level since January of 2007.

Sector News

Defense stocks have shown a substantial move to the downside on the day, dragging the Philadelphia Defense Sector Index down by 2.8 percent. With the steep drop, the index has hit its worst intraday level in well over a month.

Esterline Technologies (ESL) has helped to lead the defense sector lower, with the aerospace and defense supplier tumbling by 13.9 percent after reporting disappointing fourth quarter results.

Considerable weakness is also visible among chemical stocks, as reflected by the 2.4 percent loss being posted by the Dow Jones Chemicals Index. Dow Chemical (DOW) and Eastman (EMN) are turning in two of the sector's worst performances.

Steel stocks have also moved sharply lower on the day, resulting in a 2.2 percent drop by the NYSE Arca Steel Index. The loss has dragged the index down to its lowest levels in over five years.

Telecom, brokerage, and energy stocks are also seeing significant weakness, moving lower along with most of the other major sectors.

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 advanced by 0.7 percent, while Hong Kong's Hang Seng Index dipped by 0.3 percent.

Meanwhile, the major European markets all saw substantial weakness on the day. While the U.K.'s FTSE 100 Index plunged by 2.5 percent, the German DAX Index and the French CAC 40 Index plummeted by 2.7 percent and 2.8 percent, respectively.

In the bond market, treasuries have shown a strong move back to the upside after ending the previous session slightly lower. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, is down by 7.2 basis points at 2.106 percent.