Stocks Turn Lower After Seeing Initial Strength - U.S. Commentary

(RTTNews) - After moving higher at the open, stocks have come under pressure over the course of early trading on Wednesday. The major averages have pulled back into negative territory, adding to the steep losses posted in the previous session.

In recent trading, the major averages have bounced off their lows for the young session, but they currently remain in the red. The Dow is down 55.15 points or 0.3 percent at 17,873.05, the Nasdaq is down 10.89 points or 0.2 percent at 4,928.44 and the S&P 500 is down 2.54 points or 0.1 percent at 2,086.92.

The weakness that has emerged 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.

Electronic storage stocks have shown a significant move to the downside in early trading, dragging the NYSE Arca Disk Drive Index down by 2.1 percent.

DataLink (DTLK) is leading the storage sector lower after reporting weaker than expected first quarter results and providing disappointing second quarter guidance.

Gold and software stocks have also moved notably lower on the day, while energy stocks are moving higher along with the price of crude oil.

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.

The major European markets have also moved to the downside over the course of the session. While the U.K.'s FTSE 100 Index has edged down by 0.1 percent, the French CAC 40 Index and the German DAX Index are both down 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 4.5 basis points at 2.221 percent.