Interest Rate Concerns Contributing To Sell-Off On Wall Street

Stocks have moved sharply lower during trading on Friday, extending the downward move seen over the course of the previous session. The major averages have all shown significant moves to the downside, with the tech-heavy Nasdaq leading the way.

Currently, the major averages are just off their lows of the session. The Nasdaq is down 370.30 points or 1.9 percent at 18,737.35, the S&P 500 is down 66.47 points or 1.1 percent at 5,882.70 and the Dow is down 232.27 points or 0.5 percent at 43,518.59.

The sell-off on Wall Street comes amid concerns about the outlook for interest rates following Federal Reserve Chair Powell’s remarks on Thursday suggesting the central bank doesn’t need to hurry to lower rates.

Citing the strength of the U.S. economy, Powell said the Fed can take a careful approach to future monetary policy decisions.

The Fed is still seen as likely to lower interest rates next month, but CME Group’s FedWatch Tool suggests the chances of a quarter point rate cut have fallen to 62.1 percent from 72.2 percent on Thursday.

Potentially adding to concerns economic strength will lead the Fed to hold off on future rate cuts, the Commerce Department released a report showing retail sales increased by slightly more than expected in October.

The Commerce Department said retail sales rose by 0.4 percent in October after growing by an upwardly revised 0.8 percent in September.

Economists had expected retail sales to climb by 0.3 percent compared to the 0.4 percent increase originally reported for the previous month.

The Labor Department also released a report showing an unexpected increase by import prices in the U.S. in the month of October, which may added to recent worries about sticky inflation.

Meanwhile, the Fed released a report showing industrial production decreased in October, as the effects of recent hurricanes and the since-resolved strike at Boeing (BA) continued to weigh on growth.

Sector News

Biotechnology stocks have moved sharply lower on news President-elect Donald Trump has picked vaccine skeptic Robert F. Kennedy Jr. as Health and Human Services Secretary.

Reflecting the weakness in the sector, the NYSE Arca Biotechnology Index has plunged by 4.2 percent to a three-month intraday low.

Substantial weakness is also visible among semiconductor stocks, as reflected by the 2.7 percent slump by the Philadelphia Semiconductor Index. The index has tumbled to its lowest intraday level in almost two months.

Semiconductor equipment maker Applied Materials (AMAT) is leading the sector lower after reporting better than expected fiscal fourth quarter results but providing disappointing revenue guidance for the current quarter.

Pharmaceutical, software and retail stocks are also seeing considerable weakness on the day, while utilities stocks are among the few groups bucking the downtrend.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region turned in a mixed performance during trading on Friday. Japan’s Nikkei 225 Index rose by 0.3 percent, while China’s Shanghai Composite Index tumbled by 1.5 percent.

Meanwhile, the major European markets have all moved to the downside on the day. While the French CAC 40 Index is down by 0.5 percent, the German DAX Index is down by 0.3 percent and the U.K.’s FTSE 100 Index is down by 0.1 percent.

In the bond market, treasuries have climbed well off their worst levels but remain in negative territory. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, is up by 2.7 basis points at 4.447 percent.

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