Renewed Inflation Concerns Contribute To Weakness On Wall Street

Stocks fluctuated over the course of the trading session on Friday but maintained a negative bias throughout the day before eventually closing mostly lower.

After recovering from an early sell-off to end Thursday’s session mixed, the major averages all finished the day firmly in negative territory.

The tech-heavy Nasdaq led the way lower, slumping 223.30 points or 0.9 percent to 23,461.82, while the Dow slid 179.09 points or 0.4 percent to 48,892.47 and the S&P 500 fell 29.98 points or 0.4 percent to 6,939.03.

Meanwhile, the major averages turned in a mixed performance for the week. While the S&P 500 rose by 0.3 percent, the Nasdaq dipped by 0.2 percent and the Dow decreased by 0.4 percent.

The weakness on Wall Street may partly have reflected renewed concerns about inflation after the Labor Department released a report showing producer prices increased by much more than expected in the month of December.

The Labor Department said its producer price index for final demand climbed by 0.5 percent in December after rising by 0.2 percent in November. Economists had expected producer prices to rise by another 0.2 percent.

The report also said producer prices in December were up by 3.0 percent compared to the same month a year ago, unchanged from November. The annual rate of growth was expected to slow to 2.7 percent.

New tariff threats from President Donald Trump may have also have contributed to the negative sentiment, with the president threatening Canada with a 50 percent tariff on all aircraft sold in the U.S. over its refusal to certify certain Gulfstream jets.

Trump also signed an executive order that would impose tariffs on any goods from countries that sell or provide oil to Cuba.

Meanwhile, traders were also reacting to news that Trump announced his intent to nominate former Federal Reserve Governor Kevin Warsh to succeed Fed Chair Jerome Powell.

“While the markets are probably relieved that a well-known, former Fed official has been nominated as the next Fed chair, they are also likely to pivot to concerns that he won’t be as dovish as they were expecting the new chair to be,” said Chris Zaccarelli, Chief Investment Officer for Northlight Asset Management.

Sector News

Gold stocks turned in some of the market’s worst performances on the day amid a nosedive by the price of the precious metal, with the NYSE Arca Gold Bugs Index plummeting by 12.6 percent.

Semiconductor and computer hardware stocks also saw substantial weakness, contributing to the slump by the tech-heavy Nasdaq.

Steel, airline, biotechnology and housing stocks also showed notable moves to the downside, moving lower along with most of the other major sectors.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved mostly lower on Friday. Japan’s Nikkei 225 Index edged down by 0.1 percent, China’s Shanghai Composite Index slumped by 1 percent and Hong Kong’s Hang Seng Index tumbled by 2.1 percent.

Meanwhile, the major European markets moved to the upside on the day. While the German DAX Index advanced by 0.9 percent the French CAC 40 Index climbed by 0.7 percent and the U.K.’s FTSE 100 Index rose by 0.5 percent.

In the bond market, treasuries gave back ground following the rebound seen on Thursday. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, rose 1.4 basis points to 4.241 percent.

Looking Ahead

The Labor Department’s monthly jobs report is likely to be in the spotlight next week, while reports on manufacturing and service sector activity, job openings and consumer sentiment may also attract attention along with the latest developments on the geopolitical front.