Stocks May See Further Downside Amid Worries About Iraq - U.S. Commentary

(RTTNews) - After moving notably lower over the course of the two previous sessions, stocks may see some further downside in early trading on Friday. The major index futures are currently pointing to a modestly lower open for the markets, with the Dow futures down by 23 points.

The continued downward momentum for the markets is partly due to concerns about the situation in Iraq, where Islamic militants have seized control of two major cities in Iraq and are on the march toward Baghdad.

While both Iran and the U.S. have indicated that they will offer aid to the Iraqi government, the escalating violence has raised concerns about crude oil supplies.

On the economic front, the Labor Department recently released a report showing an unexpected decrease in U.S. producer prices in the month of May, with the drop partly reflecting a notable decrease in prices for trade services.

The Labor Department said its producer price index for final demand dipped by 0.2 percent in May after climbing by 0.6 percent in April.

The modest decrease by the index came as a surprise to economists, who had expected prices to inch up by 0.1 percent.

Excluding food and energy prices, core producer prices edged down by 0.1 percent in May following a 0.5 percent increase in April. Economists had expected core prices to tick up by 0.1 percent.

Meanwhile, a positive reaction to upbeat guidance from semiconductor giant Intel (INTC) may help to limit any early downside for the markets.

Citing stronger than expected demand for business PCs, Intel said it now expects second quarter revenues of $13.7 billion, plus or minus $300 million, up from its previous guidance of $13 billion, plus or minus $500 million.

For the full year, Intel said it now expects some revenue growth compared to its previous forecast for flat revenues. The company also lifted its gross margin guidance.

Stocks moved notably lower over the course of the trading day on Thursday, extending the downward move seen on Wednesday. Disappointing retail sales data weighed on the markets along with concerns about escalating violence in Iraq.

The major averages climbed off their lows going into the close but remained firmly negative. The Dow fell 109.69 points or 0.7 percent to 16,734.19, the Nasdaq slid 34.30 points or 0.8 percent to 4,297.63 and the S&P 500 dropped 13.78 points or 0.7 percent to 1,930.11.

In overseas trading, stock markets across the Asia-Pacific region turned in a mixed performance during trading on Friday. Japan's Nikkei 225 Index advanced by 0.8 percent, while Australia's All Ordinaries Index dropped by 0.5 percent.

Meanwhile, the major European markets have all moved to the downside on the day. While the U.K.'s FTSE 100 Index has tumbled by 1.2 percent, the French CAC 40 Index and the German DAX Index are both down by 0.9 percent.

In commodities trading, crude oil futures are climbing $0.40 to $106.93 a barrel after jumping $2.13 to $106.53 a barrel on Thursday. Meanwhile, gold futures are slipping $0.40 to $1,273.60 an ounce. In the previous session, gold rose $12.80 to $1,274 an ounce.

On the currency front, the U.S. dollar is trading at 101.97 yen compared to the 101.70 yen it fetched at the close of New York trading on Thursday. Against the euro, the dollar is valued at $1.3540 compared to yesterday's $1.3552.