U.S. Stocks Pull Back Sharply Amid Worries About Interest Rates

Stocks moved sharply lower over the course of the trading day on Friday, giving back ground following the rally seen on Thursday. The major averages all showed notable moves to the downside, with the tech-heavy Nasdaq leading the pullback.

The major averages all finished the day firmly in negative territory. The Nasdaq tumbled 217.72 points or 1.6 percent to 13,708.33, the S&P 500 slumped 54.78 points or 1.2 percent to 4,450.32 and the Dow slid 288.87 points or 0.8 percent to 34,618.24.

For the week, the major averages turned in a mixed performance. While the Dow inched up by 0.1 percent, the S&P 500 slipped by 0.2 percent and the Nasdaq fell by 0.4 percent.

The pullback on Wall Street partly reflected profit taking, with some traders cashing in on Thursday’s gains ahead of the next week’s Federal Reserve meeting.

While the Fed is widely expected to leave interest rates unchanged next week, the latest batch of U.S. economic data reignited concerns about the possibility of future rate hikes.

The Labor Department released a report this morning showing a bigger than expected increase in U.S. import prices in the month of August as well as a much bigger than expected surge in U.S. export prices.

The Labor Department said import prices climbed by 0.5 percent in August after a downwardly revised 0.1 percent uptick in July.

Economists had expected import prices to rise by 0.3 percent compared to the 0.4 percent increase originally reported for the previous month.

Meanwhile, the report said export prices spiked by 1.3 percent in August after climbing by a downwardly revised 0.5 percent in July.

Economist had expected export prices to increase by 0.3 percent compared to the 0.7 percent advance originally reported for the previous month.

A separate report released by the New York Fed showed a substantial turnaround in New York manufacturing activity in the month of September.

The Federal Reserve also released a report showing U.S. industrial production increased by much more than expected in the month of August.

The report said industrial production climbed by 0.4 percent in August following a downwardly revised 0.7 percent advance in July.

Economists had expected industrial production to inch up by 0.1 percent compared to the 1.0 percent jump originally reported for the previous month.

Meanwhile, traders largely shrugged off a report from the University of Michigan showed a notable decrease in near-term and long-term inflation expectations.

Sector News

Semiconductor stocks moved sharply lower over the course of the session, resulting in a 3.0 percent plunge by the Philadelphia Semiconductor Index.

Substantial weakness was also visible among software stocks, as reflected by the 2.3 percent slump by the Dow Jones U.S. Software Index.

Adobe (ADBE) posted a steep loss despite reporting fiscal third quarter results that exceeded analyst estimates on both the top and bottom lines.

Housing stocks also saw considerable weakness on the day, with the Philadelphia Housing Sector Index tumbling by 2.1 percent.

Retail, energy and computer hardware also moved notably lower, while gold stocks were among the few groups to buck the downtrend amid an increase by the price of the precious metal.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved mostly higher during trading on Friday. Japan’s Nikkei 225 Index surged by 1.1 percent, while Hong Kong’s Hang Seng Index advanced by 0.8 percent.

The major European markets also moved to the upside on the day. While the French CAC 40 Index jumped by 1.0 percent, the German DAX Index and the U.K.’s FTSE 100 Index climbed by 0.6 percent and 0.5 percent, respectively.

In the bond market, treasuries remained firmly negative throughout the session after coming under pressure in early trading. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, climbed 3.4 basis points to 4.322 percent.

Looking Ahead

The Fed’s monetary policy announcement is likely to be in the spotlight next week in what is otherwise a relatively light U.S. economic calendar.

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