Stocks Give Back Ground Following Four-Day Winning Streak - U.S. Commentary

(RTTNews) - Stocks moved mostly lower over the course of the trading day on Friday after trending higher over the course of the four previous sessions. The major averages turned in a mixed performance, however, as strength in the tech sector contributed to a modest gain by the Nasdaq.

While the tech-heavy Nasdaq edged up 7.48 points or 0.2 percent to 4,757.88, the Dow fell 141.38 points or 0.8 percent to 17,672.60 and the S&P 500 slid 11.33 points or 0.6 percent to 2,051.82.

Even with the mixed performance on the day, the major averages all moved higher for the week. The Nasdaq surged up by 2.7 percent, while the S&P 500 jumped by 1.6 percent and the Dow advanced by 0.9 percent.

The weakness on Wall Street partly reflected profit taking following the recent upward move, which came amid optimism about the European Central Bank's highly anticipated decision to implement quantitative easing.

In remarks at a press conference on Thursday, ECB President Mario Draghi confirmed the expansion of the bank's asset purchase program.

Draghi said the ECB will purchase 60 billion euros per month worth of securities, including investment grade sovereign bonds, beginning in March.

The expanded asset purchase program is currently scheduled to last until September of 2016, although Draghi said purchases would continue until there is a sustained improvement in inflation.

Questions about the effectiveness of the program and concerns about potential risks to the national central banks likely contributed to the pullback on Wall Street.

Peter Boockvar, managing director at the Lindsey Group, noted that commodities did not participate in the rally on Thursday despite being the implicit target of ECB quantitative easing.

"Higher commodity prices, which will happen, will certainly solve Draghi's 'price stability' problems," Boockvar said. "Then we'll definitely test the central bank thesis that higher inflation leads to growth rather than being a consequence of it."

Some negative sentiment was also generated by disappointing guidance from UPS (UPS), as the delivery giant forecast fourth quarter earnings well below analyst estimates.

The weakness on Wall Street may also have reflected anxiety ahead of the Greek parliamentary elections scheduled for the weekend.

Polls have suggested that the anti-austerity Syriza party could emerge victorious in the elections, potentially leading Greece to abandon its budget constraints.

Sector News

While many of the major sectors ended the day showing only modest moves, substantial weakness was visible among steel stocks. The NYSE Arca Steel Index plummeted by 4.7 percent, pulling back toward the nearly six-year lows set last week.

Cliffs Natural Resources (CLF), U.S. Steel (X), and ArcelorMittal (MT) turned in some of the steel sector's worst performances.

Gold stocks also came under considerable pressure on the day, dragging the NYSE Arca Gold Bugs Index down by 3.6 percent. The weakness in the sector came as gold for February delivery slid $8.10 to $1,292.60 an ounce.

Transportation, chemical, and banking stocks also saw notable weakness, giving back some ground after moving sharply higher over the past few days.

On the other hand, networking stocks moved notably higher on the day, contributing to the modest gain posted by the Nasdaq. Infinera (INFN) helped to lead the sector higher, surging up by 18 percent after reporting strong fourth quarter earnings.

Other Markets

In overseas trading, most stock markets across the Asia-Pacific region moved notably higher during trading on Friday. Japan's Nikkei 225 Index advanced by 1.1 percent, while Hong Kong's Hang Seng Index shot up by 1.3 percent.

The major European markets also moved to the upside on the day. While the U.K.'s FTSE 100 Index rose by 0.5 percent, the French CAC 40 Index and the German DAX Index jumped by 1.9 percent and 2.1 percent, respectively.

In the bond market, treasuries moved notably higher, offsetting the weakness seen in the two previous sessions. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, tumbled 7.9 basis points to 1.817 percent.

Looking Ahead

While a slew of big-name companies are scheduled to release their quarterly results next week, the spotlight is likely to be on the Federal Reserve's monetary policy announcement next Wednesday.

The Fed is widely expected to leave interest rates unchanged, although traders are likely to pay close attention to any changes to the accompanying statement.

Traders are also likely to keep an eye on reports on durable goods orders, new home sales, consumer confidence and fourth quarter GDP.