U.S. Stocks Seeing Modest Weakness Following Recent Strength

(RTTNews) - Stocks are seeing modest weakness during trading on Friday, with the Nasdaq and the S&P 500 pulling back off yesterday's record closing highs. Selling pressure has remained somewhat subdued, however, limiting the downside for the major averages.

Currently, the major averages are off their lows of the session but still in negative territory. The Dow is down 212.92 points or 0.6 percent at 38,434.18, the Nasdaq is down 2.65 points or less than a tenth of a percent at 17,664.91 and the S&P 500 is down 16.32 points or 0.3 percent at 5,417.42.

The modest weakness on Wall Street may partly reflect profit taking following the strength seen earlier in the weak, which came amid the release of tamer than expected inflation data.

While Federal Reserve officials forecast just one rate cut this year following this week's monetary policy meeting, traders are hopeful the predictions will turn out to be overly conservative if inflation continues to slow in the coming months.

"A lot can happen in a week. Markets became nervous after last Friday's strong payroll report but after several good inflation releases this week, yields fell and equities rose," said Jeffrey Roach, Chief Economist for LPL Financial.

"As we learned from the press conference, Chairman Powell is ready to respond as the data allow," he added. "At this point, inflation pressures are stuck with some sticky components, but other indicators suggest that inflation is easing and investors should expect the Fed to begin cutting rates later this year."

Negative sentiment may also have been generated in reaction to a report from the University of Michigan showing a continued deterioration in U.S. consumer sentiment in the month of June.

The report said the consumer sentiment index fell to 65.6 in June after tumbling to 69.1 in May. Economists had expected the index to rebound to 72.0.

With the unexpected decrease, the consumer sentiment index dropped to its lowest level since hitting 61.3 in November 2023.

On the inflation front, the report said year-ahead inflation expectations were unchanged at 3.3 percent in June, above the 2.3-3.0 percent range seen in the two years prior to the pandemic.

Long-run inflation expectations, on the other hand, inched up to 3.1 percent in June from 3.0 percent in May, reaching the highest level since hitting 3.2 percent in November 2023

Meanwhile, a separate report released by the Labor Department showed unexpected decreases by U.S. import and export prices in the month of May.

Sector News

Airline stocks are extending the pullback seen in the previous session, with the NYSE Arca Airline Index plunging by 2.8 percent to its lowest intraday level in six months.

Despite a modest increase by the price of crude oil, oil service stocks are also seeing considerable weakness, dragging the Philadelphia Oil Service Index down by 2.4 percent.

Significant weakness is also visible among steel stocks, as reflected by the 2.1 percent slump by the NYSE Arca Steel Index. With the drop, the index has tumbled to a seven-month intraday low.

Housing, telecom and biotechnology stocks are also seeing notable weakness, moving lower along with most of the other major sectors.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region once again turned in a mixed performance on Friday. Japan's Nikkei 225 rose by 0.2 percent and China's Shanghai Composite Index inched up by 0.1 percent, while Hong Kong's Hang Seng Index slumped by 0.9 percent.

Meanwhile, the major European markets have all moved to the downside on the day. While the French CAC 40 Index has plummeted by 3.1 percent, the German DAX Index is down by 1.7 percent and the U.K.'s FTSE 100 Index is down by 0.5 percent.

In the bond market, treasuries are extending the upward trend seen over the past several sessions. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, is down by 3.1 basis points at 4.209 percent.