Overseas Concerns Continue To Weigh On Wall Street - U.S. Commentary

(RTTNews) - After moving notably lower in early trading, stocks have seen further downside over the course of the trading day on Friday. The steep drop extends the downward move seen in the previous session, with the Dow and the S&P 500 falling to their lowest levels in over a month.

The major averages have climbed off their lows for the session in recent trading but remain firmly in the red. The Dow is down 174.57 points or 1.1 percent at 16,022.78, the Nasdaq is down 61.59 points or 1.5 percent at 4,157.28 and the S&P 500 is down 22.33 points or 1.2 percent at 1,806.13.

The continued weakness on Wall Street is partly due to a sharp pullback by overseas markets, with stocks in both Asia and Europe seeing significant weakness on the day.

Yesterday's disappointing reading on Chinese manufacturing activity continues to generate negative sentiment regarding the outlook for the global economy.

The report from Markit and HSBC showed that their index of Chinese manufacturing activity fell to 49.6 in January from 50.5 in December, with a reading below 50 indicating a contraction. Economists had expected a more modest drop to 50.3.

A sell-off in emerging-market currencies is also weighing on the markets amid concerns about China, political unrest, and U.S. monetary policy.

Despite the pullback by the broader markets, shares of Microsoft (MSFT) are moving higher after the software giant reported better than expected second quarter results after the close of trading on Thursday.

Coffee giant Starbucks (SBUX) is also bucking the downtrend after reporting first quarter earnings that exceeded estimates and raising its full-year earnings guidance.

Sector News

Transportation stocks continue to see significant weakness in mid-day trading, with the Dow Jones Transportation Average plunging by 3 percent. With the loss, the average is pulling back off the record closing high set on Thursday.

Kansas City Southern (KSU) has helped to lead the transportation sector lower, with the railroad company plummeting by 13.8 percent after reporting weaker than expected fourth quarter earnings.

Considerable weakness is also visible among steel stocks, as reflected by the 3 percent loss being posted by the NYSE Arca Steel Index. The loss extends a recent downward move by the index, which has fallen to its lowest intraday level in over three months.

Housing stocks are also seeing substantial weakness, resulting in a 2.6 percent drop by the Philadelphia Housing Sector Index. The index has fallen to a one-month intraday low.

Most of the other major sectors have also come under pressure on the day, with biotechnology, computer hardware, and defense stocks seeing notable weakness.

Other Markets

As mentioned above, most stock markets across the Asia-Pacific region saw considerable weakness during trading on Friday. Japan's Nikkei 225 Index plummeted by 1.9 percent, while Hong Kong's Hang Seng Index slumped by 1.3 percent.

The major European markets also showed substantial moves to the downside on the day. While the U.K.'s FTSE 100 Index dropped by 1.6 percent, the German DAX Index and the French CAC 40 Index plunged by 2.5 percent and 2.8 percent, respectively.

In the bond market, treasuries have moved notably higher, extending the rally seen in the previous session. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, is down by 5.3 basis points at 2.72 percent.