After initially showing a lack of direction, stocks pulled back sharply in late morning trading on Friday. The major averages slid firmly into negative territory following the strong upward move seen in the previous session.
Currently, the major averages are off their worst levels of the day but still sharply lower. The Dow is down 197.89 points or 0.8 percent at 24,074.46, the Nasdaq is down 84.42 points or 1.2 percent at 6,789.55 and the S&P 500 is down 23.93 points or 0.9 percent at 2,623.65.
The sell-off on Wall Street came following reports that former National Security Adviser Michael Flynn has agreed to cooperate with prosecutors in the investigation of Russian meddling in last year's election.
A report from ABC News said Flynn is prepared to testify that then-candidate Donald Trump directed him to make contact with the Russians.
The report comes as Flynn has pleaded guilty to lying to the FBI about conversations with the Russian ambassador, signaling that he is cooperating with Special Counsel Robert Mueller's team.
The news about Flynn has overshadowed the latest developments regarding the Senate Republican tax reform bill.
Republican leaders were forced to delay a final vote after the legislation hit a snag, although the latest reports suggest the GOP has rounded up enough votes to pass a revised bill
The outcome of the final vote on the tax reform bill is likely to have a major impact on the markets, as optimism about a corporate tax rate cut has been a key driver behind the run by stocks to new record highs.
On the U.S. economic front, the Institute for Supply Management released a report showing a modest slowdown in the pace of growth in manufacturing activity in the month of November.
The ISM said its purchasing managers index dipped to 58.2 in November from 58.7 in October, although a positive reading still indicates growth in manufacturing activity. Economists had expected the index to edge down to 58.4.
Timothy Fiore, Chair of the ISM Manufacturing Business Survey Committee, said faster growth in new orders and production was offset by supplier delivery improvement and declines in raw material inventory.
A separate report from the Commerce Department showed a much bigger than expected increase in construction spending in the month of October.
Sector News
Extending a recent downward move, semiconductor stocks have shown a significant decline on the day. The Philadelphia Semiconductor Index is down by 2.3 percent after hitting its lowest intraday level in a month.
Cypress Semiconductor (CY), Qorvo (QRVO), and Broadcom (AVGO) are turning in some of the sector's worst performances.
Reflecting weakness in the broader technology sector, computer hardware and networking have also come under pressure on the day.
Considerable weakness has also emerged among transportation stocks, which are giving back ground following recent strength. After ending the previous session at a record closing high, the Dow Jones Transportation Average is down by 1.4 percent.
Most of the other major sectors have also moved to the downside, although energy stocks continue to see notable strength amid a sharp increase by the price of crude oil.
With crude for January delivery jumping $1.01 to $58.41 a barrel, the Philadelphia Oil Service Index is up by 2.7 percent and the NYSE Arca Natural Gas Index is up by 1.8 percent.
Other Markets
In overseas trading, stock markets across the Asia-Pacific region turned in a mixed performance during trading on Friday. Japan's Nikkei 225 Index rose by 0.4 percent, while Hong Kong's Hang Seng Index fell by 0.4 percent.
Meanwhile, the major European markets all moved to the downside on the day. While the U.K.'s FTSE 100 Index fell by 0.4 percent, the French CAC 40 Index slumped by 1 percent and the German DAX Index tumbled by 1.3 percent.
In the bond market, treasuries have moved notably higher amid the news about Flynn and the sell-off on Wall Street. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, is down by 8 basis points at 2.2337 percent.
by RTT Staff Writer
For comments and feedback: editorial@rttnews.com