Stocks Close Firmly Negative Amid Drop In Global Bond Yields - U.S. Commentary

(RTTNews) - Stocks moved notably lower over the course of the trading day on Friday, adding to the modest losses posted in the previous session. With the drop on the day, the major averages pulled back further off Wednesday's highs.

The major averages climbed off their worst levels going into the close but remained firmly negative. The Dow fell 119.85 points or 0.7 percent to 17,865.34, the Nasdaq tumbled 64.07 points or 1.3 percent to 4,894.55 and the S&P 500 slid 19.41 points or 0.9 percent to 2,096.07.

For the week, the major averages turned in mixed performance. While the Dow rose by 0.3 percent, the S&P 500 edged down by 0.1 percent and the Nasdaq slumped by 1 percent.

Profit taking contributed to the weakness on Wall Street, with the S&P 500 continuing to give back ground after ending Wednesday's trading at its highest closing level in over ten months.

A drop in global bond yields also weighed on the markets, as sovereign debt yields from Japan to Germany hit record lows.

The decrease in bond yields, which move opposite of their price, reflected trepidation ahead of next week's Federal Reserve meeting as well as Britain's referendum later this month on whether to stay in the European Union.

The Fed's two-day monetary policy meeting will culminate with the release of the announcement next Wednesday followed by a press conference by Fed Chair Janet Yellen.

Recent economic data suggests the Fed will leave interest rates unchanged, but traders are likely to pay close attention to the accompanying statement.

Meanwhile, London newspaper The Independent released a poll showing that a majority of Britain's favor leaving the European Union.

Fifty-five percent of U.K. voters said they intend to vote to leave the EU in the June 23rd referendum, while 45 percent favor staying.

On the U.S. economic front, the University of Michigan released a report this morning showing a modest drop in consumer sentiment in the month of June.

The report said the preliminary reading on the consumer sentiment index for June edged down to 94.3 compared to the final May reading of 94.7. Economists had expected the index to dip to 94.0.

The modest decrease by the consumer sentiment index came after it reached its highest level since June of 2015 last month.

Sector News

Most of the major sectors showed notable moves to the downside on the day, reflecting broad based selling pressure on Wall Street.

Energy stocks showed a particularly steep drop, moving lower along with the price of crude oil. Crude for July delivery tumbled $1.49 to $49.07 a barrel.

Reflecting the weakness in the energy sector, the NYSE Arca Natural Gas Index and the Philadelphia Oil Service Index plunged 4.3 percent and 3.6 percent, respectively. The NYSE Arca Oil & Gas Index also slumped 2.2 percent.

Considerable weakness was also visible among biotechnology stocks, as reflected by the 2.4 percent loss posted by the NYSE Arca Biotechnology Index. With the drop, the index pulled back further off the nearly five-month closing high it set on Monday.

Airline stocks also saw significant weakness, with the NYSE Arca Airline Index falling by 2.3 percent after ending the previous session at its best closing level in over month.

Electronic storage, internet, financial, and steel stocks also showed notable moves to the downside over the course of the trading session.

Other Markets

In overseas trading, stocks markets across the Asia-Pacific region moved mostly lower during trading on Friday. Japan's Nikkei 225 Index fell by 0.4 percent, while Hong Kong's Hang Seng Index slumped by 1.2 percent.

The major European markets also saw significant weakness on the day. While the German DAX Index plunged by 2.5 percent, the French CAC 40 Index dove by 2.2 percent and the U.K.'s FTSE 100 Index tumbled by 1.9 percent.

In the bond market, treasuries moved notably higher amid the decrease in global bond yields. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, fell by 4.1 basis points to a three-year closing low of 1.639 percent.

Looking Ahead

While the Fed announcement is likely to be in the spotlight next week, traders will also be presented with a slew of U.S. economic data.

The reports on retail sales, industrial production, housing starts and producer and consumer price inflation could impact the outlook for future Fed decisions.