U.S. Stocks Turn Lower After Early Strength On Disappointing Sentiment Data

Stocks moved mostly lower over the course of the trading session on Friday after failing to sustain an early move to the upside. The major averages pulled back well off their initial highs and slid firmly into negative territory.

The major averages ended the session just off their worst levels of the day. The Dow slumped 299.17 points or 0.9 percent to 34,687.85, the Nasdaq slid 115.90 points or 0.8 percent to 14,427.24 and the S&P 500 fell 32.87 points or 0.8 percent to 4,327.16.

For the week, the tech-heavy Nasdaq tumbled by 1.9 percent, the S&P 500 slumped by 1 percent and the Dow decreased by 0.5 percent.

The initial strength on Wall Street came after the Commerce Department released a report showing an unexpected increase in retail sales in the month of June.

The Commerce Department said retail sales climbed by 0.6 percent in June after plunging by a revised 1.7 percent in May.

The rebound surprised economists, who had expected retail sales to fall by 0.4 percent compared to the 1.3 percent slump originally reported for the previous month.

Excluding a steep drop in sales by motor vehicle and parts dealers, retail sales jumped by an even stronger 1.3 percent in June following a revised 0.9 percent decrease in May.

Economists had been expecting ex-auto sales to increase by 0.4 percent compared to the 0.7 percent drop originally reported for the previous month.

However, stocks came under pressure after a separate report from the University of Michigan showed an unexpected slump in consumer sentiment amid concerns about inflation.

The report showed the consumer sentiment index slid to 80.8 in July from 85.5 in June. The decrease surprised economists, who had expected the index to inch up to 86.5.

“Rather than job creation, halting and reversing an accelerating inflation rate has now become a top concern,” said Surveys of Consumers chief economist Richard Curtin, noting that inflation has put added pressure on living standards and caused postponement of large discretionary purchases.

Sector News

Steel stocks moved sharply lower over the course of the trading session, dragging the NYSE Arca Steel Index down by 3.2 percent.

Substantial weakness was also visible among gold stocks, as reflected by the 3 percent slump by the NYSE Arca Gold Bugs Index.

The weakness in the gold sector came amid a pullback by the price of the precious metal, with gold for August delivery sliding $14 to $1,815 an ounce.

Energy stocks also saw considerable weakness on the day even though the price of crude oil for August delivery inched up $0.16 to $71.81 a barrel.

Airline, semiconductor and computer hardware stocks also showed notable moves to the downside, while some strength was visible among utilities stocks.

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 slumped by 1 percent, while Australia’s S&P/ASX 200 Index rose by 0.2 percent.

Meanwhile, the major European markets all moved to the downside on the day. While the U.K.’s FTSE 100 Index edged down by 0.1 percent, the French CAC 40 Index and the German DAX Index slid by 0.5 percent and 0.6 percent, respectively.

In the bond market, treasuries recovered from early weakness to end the day nearly unchanged. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, inched up by less than a basis point to 1.300 percent.

Looking Ahead

Following the slew of U.S. economic data released over the past few days, the economic calendar for next week is relatively light, although traders are still likely to keep an eye on reports on homebuilder confidence, housing starts and existing home sales.

Earnings news is like to be in the spotlight, with IBM (IBM), Travelers (TRV), Netflix (NFLX), Coca-Cola (KO), Johnson & Johnson (JNJ), Verizon (VZ), AT&T (T), Intel (INTC), Twitter (TWTR) and Honeywell (HON) among the companies due to report their quarterly results next week.

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