Stocks Seeing Further Downside Following Initial Decline - U.S. Commentary

(RTTNews) - After moving mostly lower early in the session, stocks have seen further downside over the course of the trading day on Friday. Renewed concerns about the outlook for interest rates have led to substantial selling pressure.

Currently, the major averages are posting steep losses on the day. The Dow is down 224.80 points or 1.2 percent at 18,255.11, the Nasdaq is down 75.75 points or 1.4 percent at 5,183.73 and the S&P 500 is down 29.78 points or 1.4 percent at 2,151.52.

The sell-off on Wall Street comes as remarks by Boston Federal Reserve President Eric Rosengren have led to renewed worries about a near-term interest rate hike.

In a speech to the South Shore Chamber of Commerce in Quincy, Massachusetts, Rosengren said gradual tightening of monetary policy is likely to be appropriate to ensure the U.S. economy remains at the full employment level it is now approaching.

Rosengren added that "a failure to continue on the path of gradual removal of accommodation could shorten, rather than lengthen, the duration of this recovery."

Meanwhile, Fed Governor Daniel Tarullo told CNBC a rate hike this year is possible but said he wants to see more evidence of sustained inflation before considering an increase.

The Fed is scheduled to hold its next monetary policy meeting in about two weeks, with two subsequent meetings scheduled for November and December.

Geopolitical concerns may also be weighing on the markets following North Korea's claim that it successfully tested a miniaturized nuclear warhead.

While North Korea argued the test would provide protection against "threats and sanctions" by U.S.-led hostile forces, China's state-run Xinhua news agency warned the communist nation that it will not benefit from war and instability in Northeast Asia.

President Barack Obama condemned the test in the strongest possible terms, calling it a grave threat to regional security and to international peace and stability.

Sector News

Most of the major sectors have moved to the downside on the day, with substantial weakness visible among electronic storage stocks. The NYSE Arca Disk Drive Index has plunged by 4.4 percent, pulling back further off Wednesday's two-month closing high.

Violin Memory (VMEM) has led the storage sector lower, plummeting by 38.1 percent after reporting second quarter revenues that fell sharply compared to the same quarter a year ago.

Steel stocks also continue to see significant weakness in mid-day trading, resulting in a 4 percent drop by the NYSE Arca Steel Index. Brazil's CSN (SID), Ryerson (RYI), and Cliffs Natural Resources (CLF) are posting steep losses.

Energy, gold, semiconductor, and housing stocks are also seeing considerable weakness along with interest rate-sensitive commercial real estate and utilities stocks.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region turned in yet another mixed performance on Friday. Japan's Nikkei 225 Index closed slightly higher and Hong Kong's Hang Seng Index advanced by 0.8 percent, while China's Shanghai Composite Index fell by 0.6 percent.

Meanwhile, the major European markets all moved notably lower on the day. While the U.K.'s FTSE 100 Index slumped by 1.2 percent, the French CAC 40 Index and the German DAX Index tumbled by 1.1 percent and 1 percent, respectively.

In the bond market, treasuries are extending the notable decline seen in the previous session. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, is up by 5 basis points at 1.666 percent.