Nasdaq Extends Yesterday's Pullback But Dow Inches Higher

Stocks moved mostly lower over the course of the trading on day on Friday, extending the pullback seen during Thursday’s session. The tech-heavy Nasdaq showed a steep drop on the day, while the Dow managed to close modestly higher.

The Nasdaq tumbled 166.98 points or 1.2 percent to 13,407.23 and the S&P 500 slid 21.83 points or 0.5 percent to 4,327.78. Meanwhile, the narrower Dow inched up 39.15 points or 0.1 percent to 33,670.29.

The major averages also turned in a mixed performance for the week. While the Nasdaq dipped by 0.2 percent, the S&P 500 rose by 0.5 percent and the Dow climbed by 0.8 percent.

Selling pressure emerged following the release of a report from the University of Michigan showing a slump in consumer sentiment and a surge in inflation expectations.

The University of Michigan said its consumer sentiment index tumbled to 63.0 in October from 68.1 in September, while economists had expected the index to edge down to 67.4.

“Assessments of personal finances declined about 15%, primarily on a substantial increase in concerns over inflation, and one-year expected business conditions plunged about 19%,” said Surveys of Consumers Director Joanne Hsu.

The report also showed a sharp increase in year-ahead inflation expectations, which jumped to 3.8 percent in October from 3.2 percent in September, reaching the highest level since May.

Long-run inflation expectations also rose to 3.0 percent in October from 2.8 percent in September but remained within the narrow 2.9-3.1 percent range seen for 25 of the last 27 months.

The data generated some negative sentiment, although a decrease in treasury yields helped to limit the downside.

Traders also reacted positively to earnings news from financial giant JPMorgan Chase (JPM), which moved to the upside after reporting better than expected third quarter revenue.

Fellow Dow component UnitedHealth (UNH) also jumped after reporting third quarter results that exceeded analyst estimates, contributing to the uptick by the Dow.

Sector News

Semiconductor stocks led the technology sector lower on the day, with the Philadelphia Semiconductor Index plunging by 2.7 percent.

Significant weakness was also visible among networking stocks, as reflected by the 1.8 percent loss posted by the NYSE Arca Networking Index.

Transportation, computer hardware and software stocks also saw notable weakness, while gold stocks moved sharply higher along with the price of the precious metal.

With gold for December delivery soaring $4.55 to $86.35 a barrel, the NYSE Arca Gold Bugs Index spiked by 4.6 percent.

A surge by the price of crude oil also contributed to strength among energy stocks, with the NYSE Arca Oil Index and the Philadelphia Oil Service Index jumping by 2.1 percent and 1.8 percent, respectively.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved mostly lower during trading on Friday. Japan’s Nikkei 225 Index slid by 0.6 percent, while Hong Kong’s Hang Seng 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 fell by 0.6 percent, the French CAC 40 Index and the German DAX Index tumbled by 1.4 percent and 1.6 percent, respectively.

In the bond market, treasuries regained ground following the sharp pullback seen in the previous session. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, slumped by 8.3 basis points to 4.629 percent.

Looking Ahead

Next week’s trading may be impacted by reaction to latest U.S. economic data, including reports on retail sales, industrial production, housing starts and existing home sales.

On the earnings front, Bank of America (BAC), Goldman Sachs (GS), Johnson & Johnson (JNJ), Morgan Stanley (MS), Procter & Gamble (PG), Netflix (NFLX), Tesla (TSLA), AT&T (T) and American Express (AXP) are among the companies due to report their quarterly results next week.

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