Stocks Seeing Modest Weakness Following Post-Election Rally - U.S. Commentary

(RTTNews) - After initially showing a lack of direction, stocks have moved modestly lower over the course of the trading session on Friday. Selling pressure has remained relatively subdued, however, limiting the downside for the markets.

Currently, the major averages remain below the unchanged line. The Dow is down 51.06 points or 0.3 percent at 18,756.82, the Nasdaq is down 10.65 points or 0.2 percent at 5,198.14 and the S&P 500 is down 12.29 points or 0.6 percent at 2,155.19.

The modest pullback on Wall Street comes as the markets are pausing to take a breath after gains seen in reaction to President-election Donald Trump's surprise victory lifted the Dow to a record closing high on Thursday.

Nonetheless, some traders may be away from their desks due to the Veterans Day holiday, as banks and the bond markets are closed on the day.

On the U.S. economic front, the University of Michigan released a report showing a much bigger than expected rebound in consumer sentiment in the month of November.

The preliminary report showed that the consumer sentiment index jumped to 91.6 in November after slumping to 87.2 in October. Economists had expected the index to inch up to 87.5.

With the bigger than expected increase, the consumer sentiment index reached its highest level since climbing to 94.7 in May.

However, Richard Curtin, the survey's chief economist, said the most striking finding in early November was a jump in both near and long-term inflation expectations.

The report said one-year inflation and five-year inflations expectations both spiked to 2.7 percent in November from 2.4 percent in October.

"These increases must be replicated before they can be taken to indicate a troublesome development," Curtin said. "Nonetheless, it may be viewed as added justification for next month's expected interest rate hike."

With regard to interest rates, Federal Reserve Vice Chairman Stanley Fischer said the case for gradually removing accommodation is quite strong, as the Fed is close to achieving its dual mandate.

"In my view, the prospects of a continued steady expansion in the U.S. economy are maximized to the extent that we proceed with a gradual removal of accommodation," Fischer said in remarks to a central banking conference in Santiago, Chile.

He added, "Such a gradual approach to tightening policy will also help mitigate the risk of undesirable spillovers abroad--including by reducing the risk of having to tighten more abruptly later on--and in turn promote a stronger global economy."

Sector News

Extending a recent sell-off in the sector, gold stocks have shown a substantial move to the downside on the day. The NYSE Arca Gold Bugs Index has plummeted by 5.1 percent to a seven-month intraday low.

The continued weakness in the gold sector comes amid a steep drop by the price of the precious metal, with gold for December delivery plunging $36.70 to $1,229.70 an ounce.

Significant weakness is also visible among energy stocks, which are giving back ground after rallying in response to Trump's surprise victory. A sharp decline by the price of crude oil is also weighing on the sector, as crude for December delivery is tumbling $1.41 to $43.25 a barrel.

Steel, airline, and pharmaceutical stocks are also pulling back off their recent highs, while considerable strength is visible among semiconductor, tobacco, and electronic storage stocks.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region turned in a mixed performance on Friday following the mixed closed on Wall Street overnight. Japan's Nikkei 225 Index edged up by 0.2 percent, while Hong Kong's Hang Seng Index slumped by 1.4 percent.

The major European markets also turned mixed over the course of the trading session. While the German DAX Index rose by 0.4 percent, the French CAC 40 Index dropped by 0.9 percent and the U.K.'s FTSE 100 Index tumbled by 1.4 percent.

Meanwhile, as mentioned above, the bond markets are closed for the day in honor of the Veterans Day holiday.