Profit Taking, Treasury Yield Spike Leads To Sharp Pullback On Wall Street

(RTTNews) - Following the strength seen in the previous session, stocks pulled back sharply over the course of the trading day on Friday. The major averages all showed significant moves to the downside on the day.

The major averages finished the day off their lows of the session but still firmly negative. The Dow slumped 537.29 points or 1.1 percent to 49,526.17, the Nasdaq plunged 410.08 points or 1.5 percent to 26,225.14 and the S&P 500 tumbled 92.74 points or 1.2 percent to 7,408.50.

With the pullback on the day, the major averages were little changed for the week. The S&P 500 crept up by 0.1 percent, while the Nasdaq edged down by 0.1 percent and the Dow dipped by 0.2 percent.

The sell-off on Wall Street may partly have reflected profit taking following recent strength in the markets, which lifted the Nasdaq and S&P 500 to record highs.

Technology stocks helped lead the pullback, with Intel (INTC) and Micron Technology (MU) plunging by 6.6 percent and 6.2 percent, respectively. Shares of Nvidia (NVDA) also tumbled by 4.4 percent.

A sharp increase in treasury yields also weighed on the markets, with the yield on the benchmark ten-year note surging to its highest levels in almost a year.

The spike in treasury yields came as recent data showing significant accelerations in the pace of consumer and producer price inflation has led to concerns about the outlook for interest rates.

CME Group's FedWatch Tool is currently indicating a 38.9 percent chance rates will be a quarter point higher following the Federal Reserve's last meeting of the year, up from just 13.7 percent a week ago.

The weakness on Wall Street also came amid a sharp increase by the price of crude oil, as U.S. crude oil futures have surged by more than 4 percent.

The jump in oil prices came as the summit between President Donald Trump and his Chinese counterpart Xi Jinping produced warm words but yielded little progress on the U.S. war with Iran.

Sector News

Gold stocks moved sharply lower along with the price of the precious metal, resulting in a 7.1 percent nosedive by the NYSE Arca Gold Bugs Index.

Substantial weakness was also visible among airline stocks, as reflected by the 4.4 percent plunge by the NYSE Arca Airline Index.

Semiconductor stocks also showed a significant move to the downside, dragging the Philadelphia Semiconductor Index down by 4 percent.

Steel, housing and computer hardware stocks also saw considerable weakness, while oil producer and software stocks bucked the downtrend.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved mostly lower on Friday. China's Shanghai Composite Index slumped by 1 percent, Japan's Nikkei 225 Index tumbled by 2 percent and South Korea's Kospi plunged by 6.1 percent.

The major European markets also showed significant moves to the downside. While the German DAX Index dove by 2.1 percent, the U.K.'s FTSE 100 Index and the French CAC 40 Index shed 1.7 percent and 1.6 percent, respectively.

In the bond market, treasuries nosedived amid concerns about the outlook for interest rates. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, soared 13.4 basis points to a nearly one-year closing high of 4.595 percent.