Modest Weakness Remains Visible On Wall Street - U.S. Commentary

(RTTNews) - Stocks continue to see modest weakness in mid-day trading on Wednesday after turning lower earlier in the session. Selling pressure has remained relatively subdued, however, limiting the downside for the broader markets.

The major averages have moved roughly sideways in recent trading, stuck below the unchanged line. The Dow is down 47.51 points or 0.3 percent at 17,880.69, the Nasdaq is down 9.29 points or 0.2 percent at 4,930.04 and the S&P 500 is down 4.06 points or 0.2 percent at 2,085.40.

The modest weakness on Wall Street is partly in reaction to comments by Federal Reserve Chair Janet Yellen, who warned about high stock valuations.

"I would highlight that equity market valuations at this point generally are quite high," Yellen said during a discussion with International Monetary Fund Managing Director Christine Lagarde. "There are potential dangers there."

Yellen also noted that there could be a sharp jump in long-term rates when the Fed eventually begins raising interest rates.

Traders are also reacting to a report from payroll processor ADP showing that private sector employment increased by much less than expected in the month of April.

ADP said employment in the private sector increased by 169,000 jobs in April compared to a downwardly revised increase of 175,000 jobs in March.

Economists had expected private sector employment to climb by about 200,000 jobs compared to the addition of 189,000 jobs originally reported for the previous month.

The weaker than expected data may point to some downside risk for the Labor Department's monthly jobs report, which includes both private and public sector jobs.

The Labor Department report due on Friday is currently expected to show an increase of about 220,000 jobs in April compared to the increase of 126,000 jobs in March.

Despite the disappointing ADP data, Paul Ashworth, Chief U.S. Economist at Capital Economics, said most other labor market indicators suggest Friday's report will show much healthier job growth.

Sector News

While many of the major sectors are showing only modest moves, considerable weakness remains visible among electronic storage stocks. The NYSE Arca Disk Drive Index is down by 2.5 percent after hitting its worst intraday level in a month.

DataLink (DTLK) has helped to lead storage sector lower, plunging by 15.6 percent after reporting weaker than expected first quarter results and providing disappointing second quarter guidance.

Gold stocks also remain under pressure in mid-day trading, as reflected by the 2.4 percent loss being posted by the NYSE Arca Gold Bugs Index. The weakness in the sector comes as gold for June delivery is sliding $4.20 to $1,189 an ounce.

Software, telecom, and utilities stocks are also seeing some weakness on the day, while notable strength has emerged among railroad stocks.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved mostly lower on Wednesday, although the Japanese markets remained closed. China's Shanghai Composite Index slumped by 1.6 percent, while Australia's All Ordinaries Index plummeted by 2.2 percent.

Meanwhile, the major European markets closed modestly higher following a choppy trading session. While the U.K.'s FTSE 100 Index inched up by 0.1 percent, the French CAC 40 Index and the German DAX Index both rose by 0.2 percent.

In the bond market, treasuries are extending their recent downtrend despite the disappointing jobs data. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, is up by 4.7 basis points at 2.223 percent.