Stocks Close Firmly In The Red Amid Worries About Greece - U.S. Commentary

(RTTNews) - After coming under pressure early in the session, stocks remained firmly in the red through the trading session on Friday. The losses on the day party offset the gains posted in the two previous sessions, although the major averages remained well off Tuesday's lows.

The major averages moved roughly sideways in afternoon trading, stuck in negative territory. The Dow ended the day down 140.53 points or 0.8 percent at 17,898.84, the Nasdaq fell 31.41 points or 0.6 percent to 5,051.10 and the S&P 500 slid 14.75 points or 0.7 percent to 2,094.11.

For the week, the major averages turned in a mixed performance. While the Nasdaq dipped by 0.3 percent, the Dow rose by 0.3 percent and the S&P 500 edged up by 0.1 percent.

Concerns about Greece's stalled negotiations with its international creditors contributed to the weakness on Wall Street following yesterday's news that the International Monetary Fund has halted bailout talks.

With a repayment deadline looming at the end of the month, the lack of progress in the talks has led to renewed worries about a possible default by Greece.

Jonathan Loynes, Chief European Economist at Capital Economics, said, "Greece's creditors have made it clear that the ball is firmly in its court to make the concessions needed to reach a last-minute agreement."

"But even if Greece finally blinks, the stop-gap deal that will probably result is unlikely to bring a permanent end to the crisis," he added.

Several officials told Reuters that the possibility of a Greek default has been formally discussed for the first time among senior European Union officials.

Meanwhile, traders largely shrugged off the latest batch of U.S. economic data, including a report from the University of Michigan showing a much bigger than expected improvement in consumer sentiment in June.

The report said the preliminary reading on the consumer sentiment index for June came in at 94.6 compared to the final may reading of 90.7. Economists had expected the index to show a much more modest increase to 91.2.

Before the start of trading, the Labor Department released a separate report showing that producer prices rose by more than expected in May due to a substantial rebound in energy prices.

Sector News

Biotechnology stocks showed a significant move to the downside on the day, dragging the NYSE Arca Biotechnology Index down by 1.8 percent.

Agios Pharmaceuticals (AGIO) led the biotech sector lower, tumbling by 10.2 percent despite reporting an impressive response rate for its leukemia treatment.

Considerable weakness also emerged among natural gas stocks, as reflected by the 1.3 percent loss posted by the NYSE Arca Natural Gas Index. With the drop, the index fell to its lowest closing level in well over two months.

The losses by natural gas stocks came amid a decrease by the price of their associated commodity, with natural gas for July delivery falling $0.075 to $2.75 per million BTUs.

Oil, health care, and trucking stocks also came under pressure on the day, while most of the major sectors showed more modest moves to the downside.

Airline stocks bucked the downtrend, however, resulting in a 1.1 percent gain by the NYSE Arca Airline Index. The index continued to recover from the six-month closing low set on Tuesday.

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 inched up by 0.1 percent, while Australia's All Ordinaries Index dipped by 0.2 percent.

Meanwhile, the major European markets all came under pressure on the day. While the U.K.'s FTSE 100 Index dropped by 0.9 percent, the German DAX Index and the French CAC 40 Index tumbled by 1.2 percent and 1.4 percent, respectively.

In the bond market, treasuries ended the day roughly flat after moving modestly higher early in the session. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, inched up by less than a basis point to 2.385 percent.

Looking Ahead

The Federal Reserve is likely to move into the spotlight next week, with the central bank due to announce its latest monetary policy decision next Wednesday.

The Fed is not expected to announce an increase in interest rates due to some recent signs of economic sluggishness, but traders will be paying close attention to any hints regarding the timing of the first rate hike.

The monetary policy statement will be accompanied by a press conference by Fed Chair Janet Yellen as well as the central bank's latest forecasts.

While the Fed will likely be the main focus, traders may also keep an eye on reports on industrial production, housing starts, and consumer prices.