U.S. Stocks Moderately Lower As Fed Meeting Looms

Stocks have moved mostly lower during trading on Friday, with the Nasdaq and the S&P 500 extending the pullback seen over the two previous sessions. Selling pressure has remained relatively subdued, however, limiting the downside for the major averages.

Currently, the major averages are off their lows of the session but still in negative territory. The Nasdaq is down 89.17 points or 0.6 percent at 16,039.36, the S&P 500 is down 15.57 points or 0.3 percent at 5,134.91 and the Dow is down 46.55 points or 0.1 percent at 38,859.11.

The weakness on Wall Street may reflect concerns about the outlook for interest rates ahead of the Federal Reserve’s monetary policy meeting next week.

While the Fed is widely expected to leave interest rates unchanged, traders will look to the accompanying statement for clues about the outlook for rates.

Recent hotter-than-expected inflation readings have reduced optimism about the likelihood of the Fed’s first rate cut coming in June.

According to the CME Group’s FedWatch Tool, the probability of the Fed leaving rates unchanged at its June meeting has climbed from 25 percent to 41.6 percent.

On the U.S. economic front, a report released by the Labor Department showed import prices in the U.S. increased in line with economist estimates in the month of February.

The Labor Department said import prices rose by 0.3 percent in February after climbing by 0.8 percent in January. The uptick matched expectations.

Meanwhile, the report said export prices advanced by 0.8 percent in February following an upwardly revised 0.9 percent increase in January.

Economists had expected export prices to edge up by 0.2 percent compared to the 0.8 percent growth originally reported for the previous month.

The Fed also released a report showing a slight increase in U.S. industrial production in the month of February, with manufacturing and mining output recovering from weather-related declines in January

The Fed said industrial production inched up by 0.1 percent in February after falling by a downwardly revised 0.5 percent in January.

Economists had expected industrial production to come in unchanged compared to the 0.1 percent dip originally reported for the previous month.

Meanwhile, preliminary data released by the University of Michigan unexpectedly showed a slight deterioration in U.S. consumer sentiment in the month of March.

The report said the consumer sentiment index edged down to 76.5 in March after falling to 76.9 in February. Economists had expected the index to come in unchanged.

Year-ahead and long-run inflation expectations remained unchanged from the previous month at 3.0 percent and 2.9 percent, respectively.

The Federal Reserve Bank of New York also released a report showing New York manufacturing activity has contracted at a significantly accelerated rate in the month of March.

Software stocks are seeing substantial weakness on the day, with the Dow Jones U.S. Software Index slumping by 1.9 percent after ending the previous session at its best closing level in over a month.

Adobe (ADBE) has led the sector lower, plunging by 13.6 percent after reporting better than expected fiscal first quarter results but providing disappointing revenue guidance for the current quarter.

On the other hand, housing stocks have shown a strong move back to the upside after falling sharply on Thursday, driving the Philadelphia Housing Sector Index up by 1.1 percent.

In overseas trading, stock markets across the Asia-Pacific region moved mostly lower on Friday. Hong Kong’s Hang Seng Index tumbled by 1.4 percent and Japan’s Nikkei 225 Index fell by 0.3 percent, although China’s Shanghai Composite Index bucked the downtrend and rose by 0.5 percent.

Meanwhile, the major European markets have turned mixed on the day. While the U.K.’s FTSE 100 Index has edged down by 0.1 percent, the German DAX Index is up by 0.3 percent and the French CAC 40 Index is up by 0.5 percent.

In the bond market, treasuries are seeing modest weakness, extending the downward trend seen throughout the week. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, is up by 1.8 basis points at 4.316 percent.