Negative Reaction To Earnings News, Retail Sales Data Weighing On Wall Street

Stocks have moved sharply lower over the course of morning trading on Friday, extending the pullback seen late in the previous session. With the drop, the Dow and the Nasdaq are pulling back further off the record intraday highs set in early trading on Thursday.

The major averages have climbed off their worst levels in recent trading but remain firmly negative. The Dow is down 257.13 points or 0.8 percent at 30,734.39, the Nasdaq is down 95.66 points or 0.7 percent at 13,016.98 and the S&P 500 is down 31.79 points or 0.8 percent at 3,763.75.

The sell-off on Wall Street partly reflects a negative reaction to earnings news from financial giants Wells Fargo (WFC), Citigroup (C) and JPMorgan Chase (JPM).

Wells Fargo and Citigroup are posting steep losses after both reported better than expected fourth quarter earnings but on revenues that missed estimates.

Shares of JPMorgan have also moved notably lower even though the company reported fourth quarter results that beat expectations on both the top and bottom lines.

JPMorgan benefited from the release of money previously set aside for expected loan defaults, although its earnings would have still beat estimates with the boost.

Negative sentiment was also generated in reaction to a report from the Commerce Department showing a continued decline in U.S. retail sales in the month of December.

The Commerce Department said retail sales fell by 0.7 percent in December after tumbling by a revised 1.4 percent in November.

Economists had expected retail sales to come in unchanged compared to the 1.1 percent slump originally reported for the previous month.

Excluding sales by motor vehicle and parts dealers, retail sales plunged by 1.4 percent in December after sliding by 1.3 percent in November.

Ex-auto sales were expected to edge down by 0.1 percent compared to the 0.9 percent decrease originally reported for the previous month.

Meanwhile, the Federal Reserve released a separate report showing U.S. industrial production jumped by much more than expected in the month of December.

The Fed said industrial production surged up by 1.6 percent in December after climbing by an upwardly revised 0.5 percent in November.

Economists had expected production to rise by 0.4 percent, matching the increase originally reported for the previous month.

"The December production data underline that while new restrictions are holding back parts of the service sector again, the recovery in manufacturing continues largely unaffected," said Michael Pearce, Senior U.S. Economist at Capital Economics.

The weakness on Wall Street may also reflect the old adage of "sell the news" after President-elect Joe Biden announced a $1.9 trillion coronavirus relief package on Thursday.

The proposed stimulus package includes an increase in direct payments to individuals, increased federal unemployment benefits and aid to state and local governments.

Energy stocks are turning in some of the market's worst performances in morning trading amid a sharp pullback by the price of crude oil. Crude for February delivery is tumbling $1.61 to $51.96 a barrel after reaching an eleven-month high on Thursday.

Reflecting the weakness in the energy sector, the Philadelphia Oil Service Index is down by 5.2 percent and the NYSE Arca Oil Index is down by 3.2 percent.

Substantial weakness has also emerged among steel stocks, as reflected by the 4.5 percent nosedive by the NYSE Arca Steel Index.

Airline stocks are also seeing considerable weakness after moving sharply higher in the previous session, with the NYSE Arca Airline Index tumbling by 2.9 percent.

Financial, chemical and transportation stocks have also moved significantly lower amid a broad based sell-off on Wall Street.

In overseas trading, stock markets across the Asia-Pacific region turned in a mixed performance during trading on Friday. Japan's Nikkei 225 Index slid by 0.6 percent, while Hong Kong's Hang Seng Index rose by 0.3 percent.

Meanwhile, the major European markets have shown substantial moves to the downside on the day. While the German DAX Index has plunged by 2.1 percent, the French CAC 40 Index is down by 1.9 percent and the U.K.'s FTSE 100 Index is down by 1.7 percent.

In the bond market, treasuries have seen some volatility in recent trading but are currently higher. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, is down by 2.7 basis points at 1.102 percent.

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