US Stocks Move Sharply Lower On Interest Rate Concerns

The major averages all moved sharply lower on the day, pulling back well off Monday's record closing highs.

The tech-heavy Nasdaq led the way lower, plunging 427.53 points (2.2%) to 18,680.12. The S&P 500 also tumbled 78.55 points (1.3%) to 5,870.62 while the narrower Dow slid 305.87 points (0.7%) to 43,444.99.

The sell-off on Wall Street came 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.

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 58.4% from 72.2% 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% in October after growing by an upwardly revised 0.8% in September. The Labor Department also released a report showing unexpected increases by import and export prices in the month of October which may have added to recent worries about sticky inflation.

Meanwhile, the Fed released a report showing industrial production decreased in October.

Biotechnology stocks moved sharply lower after President Donald Trump picked Robert F. Kennedy Jr. as the Health and Human Services Secretary. Reflecting the weakness in the sector, the NYSE Arca Biotechnology Index plunged by 3.4%. Semiconductor stocks displayed substantial weakness as reflected by the 2.4% slump by the Philadelphia Semiconductor Index. Semiconductor equipment maker Applied Materials (AMAT) led the sector lower after reporting better than expected fiscal fourth quarter results but providing disappointing revenue guidance for the current quarter.

Pharmaceutical, networking, software and retail stocks also saw considerable weakness while utilities stocks were among the few groups to buck the downtrend.

Asia-Pacific stocks turned in a mixed performance on Friday. Japan's Nikkei 225 Index rose by 0.3% while China's Shanghai Composite Index tumbled by 1.5%.The major European markets moved downwards while the French CAC 40 Index slid by 0.6%, the German DAX Index fell by 0.3% and the U.K.'s FTSE 100 Index edged down by 0.1%.

In the bond market, treasuries recovered from early weakness to end the day little changed. As a result, the yield on the benchmark ten-year note that moves opposite of its price, crept up by just 1 bps to 4.42% after reaching a five-month intraday high of 4.50%.

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