U.S. Stocks Climb Off Worst Levels But Remain Mostly Lower

Stocks have climbed off their worst levels of the day but remain mostly negative in morning trading on Friday. The major averages have all moved back to the downside following the notable rebound seen in the previous session.

Currently, the major averages remain firmly in negative territory. The Dow is down 212.70 points or 0.7 percent at 30,390.66, the Nasdaq is down 76.28 points or 0.6 percent at 13,260.88 and the S&P 500 is down 24.11 points or 0.6 percent at 3,763.27.

The pullback on Wall Street partly reflects concerns about recent market volatility as traders keep a close eye on heavily shorted stocks like GameStop (GME) and AMC Entertainment (AMC).

GameStop and AMC Entertainment are soaring in morning trading after Robinhood eased restrictions on certain stocks that have skyrocketed in recent trading.

The spikes by the heavily shorted stocks have been described as a “retail investor revolt,” raising concerns hedge funds may have to sell other securities to make up for their losses.

Negative sentiment was also generated in reaction to news that Johnson & Johnson’s (JNJ) one-dose coronavirus vaccine appears to be less potent against variants.

J&J said the vaccine demonstrated 72 percent effectiveness in the U.S. compared to 66 percent in Latin America and 57 percent in South Africa.

In U.S. economic news, the Commerce Department released a report showing a much bigger than expected increase in U.S. personal income in the month of December, although the report also showed a modest decrease in personal spending.

The report said personal income climbed by 0.6 percent in December after tumbling by a downwardly revised 1.3 percent in November.

Economists had expected personal income to inch up by 0.1 percent compared to the 1.1 percent slump originally reported for the previous month.

Meanwhile, the Commerce Department said personal spending dipped by 0.2 percent in December after falling by a downwardly revised 0.7 percent in November.

Economists had expected spending to decrease by 0.4 percent, matching the drop originally reported for the previous month.

The University of Michigan also released a report showing consumer sentiment deteriorated by slightly more than initially estimated in the month of January.

The report said the consumer sentiment index for January was downwardly revised to 79.0 from the preliminary reading of 79.2.

Economists had expected the consumer sentiment index to be unrevised from the preliminary reading, which was still down from 80.7 in December.

Steel stocks are turning in some of the market’s worst performances in morning trading, dragging the NYSE Arca Steel Index down by 1.9 percent.

Considerable weakness is also visible among housing stocks, as reflected by the 1.7 percent drop by the Philadelphia Housing Sector Index.

The weakness in the housing sector comes after the National Association of Realtors released a report showing pending home sales fell for the fourth straight month in December.

Airline, chemical and oil stocks are also seeing notable weakness on the day, while gold and biotechnology stocks have shown strong moves to the upside.

In overseas trading, stock markets across the Asia-Pacific region moved notably lower during trading on Friday. Japan’s Nikkei 225 Index tumbled by 1.9 percent, while South Korea’s Kospi plunged by 3 percent.

The major European markets have also shown significant moves to the downside on the day. While the German DAX Index is down by 0.9 percent, the U.K.’s FTSE 100 Index and the French CAC 40 Index are both down by 1.2 percent.

In the bond market, treasuries are extending the pullback seen in the previous session. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, is up by 3.6 basis points at 1.093 percent.

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