Renewed Fed Uncertainty Weighing On Wall Street - U.S. Commentary

(RTTNews) - After failing to sustain an early upward move, stocks have given back some ground over the course of the trading day on Friday. Renewed uncertainty about the outlook for the Federal Reserve's stimulus program is weighing on investor sentiment.

The major averages have pulled back well off their early highs and are currently mixed. While the Dow is up 25.56 points or 0.2 percent at 15,571.31, the Nasdaq is down 7.89 points or 0.2 percent at 3,911.82 and the S&P 500 is down 0.46 points or less than a tenth of a percent at 1,756.08.

The early strength on Wall Street was partly due to upbeat data on Chinese manufacturing activity in the month of October.

A report from the China Federation of Logistics and Purchasing and the National Bureau of Statistics showed that the index of activity in the Chinese manufacturing sector rose to 51.4 in October from 51.1 in September.

With the modest increase, the Chinese manufacturing index reached an eighteen-month high and came in above economist estimates for a reading of 51.2.

Not long after the open, the Institute for Supply Management released a separate report showing that U.S. manufacturing activity unexpectedly expanded at a slightly faster rate in the month of October.

The ISM said its purchasing managers index inched up to 56.4 in October from 56.2 in September, with a reading above 50 indicating an increase in manufacturing activity.

The modest increase came as a surprise to economists, who had expected the index of manufacturing activity to dip to 55.0.

While the report points to strength in the U.S. manufacturing sector, it has also added to recent uncertainty about the outlook for the Federal Reserve's asset purchase program.

James Knightley, an economist at ING Bank, said, "In general it is a very firm report and will help keep faint thoughts of a December Fed taper alive."

"However, the apparent loss of momentum in the labor market coupled likely soft 3Q GDP number next week could quickly see them fade again," he added.

Sector News

Gold stocks are seeing substantial weakness in mid-day trading, extending the downward trend seen over the past few days. The NYSE Arca Gold Index has plunged by 3.6 percent, pulling back further off the one-month highs set on Monday.

A continued decrease by the price of gold is weighing on the sector, with gold for December delivery falling $15.30 to $1,308.40 an ounce.

Considerable weakness has also emerged among housing stocks, as reflected by the 1.9 percent loss being posted by the Philadelphia Housing Sector Index. The index is pulling back further off Tuesday's four-month closing high.

Oil and electronic storage stocks have also come under pressure on the day, while notable strength remains visible among utilities stocks.

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 fell by 0.9 percent, while Hong Kong's Hang Seng Index edged up by 0.2 percent.

The major European markets have also turned mixed on the day. While the U.K.'s FTSE 100 Index is up by 0.1 percent, the French CAC 40 Index is down by 0.6 percent and the German DAX Index is down by 0.2 percent.

In the bond market, treasuries have come under pressure on the heels of the upbeat manufacturing data. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, is up by 6.9 basis points at 2.611 percent.