U.S. Stocks Regain Ground After Initial Slump But Remain Firmly Negative


Stocks moved sharply lower in early trading on Friday, extending the downward move seen over the course of the previous session. With the extended decline, the major averages fell to their lowest intraday levels in two months.

The major averages have regained some ground since then but currently remain firmly negative. The Dow is down 197.56 points or 0.6 percent at 30,764.26, the Nasdaq is down 139.31 points or 1.2 percent at 11,413.05 and the S&P 500 is down 34.44 points or 0.9 percent at 3,866.91.

A steep drop by shares of FedEx (FDX) contributed to the early weakness on Wall Street, with the delivery giant plunging by 22.6 percent.

The sell-off by FedEx comes after the company reported weaker than expected preliminary fiscal first quarter results and withdrew its full-year guidance.

FedEx cited global volume softness and expectations for a continued volatile operating environment and warned it expects business conditions to further weaken in the second quarter.

The warning from FedEx has added to concerns about the outlook for the global economy amid monetary policy tightening by central banks around the world.

Concerns about the outlook for interest rates also continue to weigh on the markets ahead of the Federal Reserve’s monetary policy decision next week.

The Fed is widely expected to raise interest rates by another 75 basis points, although some see an outside chance for a 100 basis point rate hike.

However, stocks regained some ground following the release of a report from the University of Michigan showing a modest improvement in consumer sentiment and a decrease in inflation expectations.

The University of Michigan said its consumer sentiment index inched up to 59.5 in September from 58.2 in August. With the uptick, the consumer sentiment index reached its highest level since hitting 65.2 in April.

The report also showed the recent decline in energy prices has contributed to a decrease in inflation expectations.

One-year inflation expectations dipped to 4.6 percent in September from 4.8 percent in August, while five-year inflation expectations edged down to 2.8 percent from 2.9 percent.

The Fed has indicated that its aggressive monetary policy tightening partly reflects a desire to prevent elevated inflation expectations from becoming entrenched.

With FedEx leading the way lower, transportation stocks have shown a substantial move to the downside, dragging the Dow Jones Transportation Average down by 4.8 percent.

Oil service stocks are also seeing significant weakness despite an increase by the price of crude oil, with the Philadelphia Oil Service Index tumbling by 3.0 percent.

Considerable weakness is also visible among natural gas stocks, as reflected by the 2.6 percent slump by the NYSE Arca Natural Gas Index. A pullback by the price of natural gas is weighing on the sector.

Brokerage, networking and biotechnology stocks have also shown notable moves to the downside, while gold stocks are bucking the downtrend amid a modest increase by the price of the precious metal.

In overseas trading, stock markets across the Asia-Pacific region moved mostly lower during trading on Friday. Japan’s Nikkei 225 Index slumped by 1.1 percent, while China’s Shanghai Composite Index plunged by 2.3 percent.

The major European markets have also moved to the downside on the day. While the U.K.’s FTSE 100 Index has dipped by 0.3 percent, the French CAC 40 Index is down by 1.0 percent and the German DAX Index is down by 1.5 percent.

In the bond market, treasuries have turned positive after seeing early weakness. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, is down by 3.5 basis points at 3.424 percent.

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