Wall Street drops as financials, energy stocks weigh

The S&P 500 was up 8.83 points, or 0.42 per cent, at 2,118.24, slightly off its session high. The pan-European Stoxx 600 closed down 2.4%, the third consecutive drop.

Stocks rose after Federal Reserve chair Janet Yellen affirmed that interest-rate hikes would be gradual and only in response to strong economic data.

The Standard and Poor’s 500 Index (NYSEARCA:SPY) declined 0.9% Friday and ended lower for the week. “The result of that is this sideways trading market with very limited risk tolerance on the part of the broad investment community”.

The S&P has gained 3.3 per cent since the start of the year.

“Her message really is that the U.S. is making consistent progress towards full-employment, that inflation should pick up and there’s more positives than negatives”.

The S&P 500 added 0.1 percent to 2,112.13 at 4 p.m.in NY, after climbing as much as 0.5 percent. The latest rally pushed it into bullish territory on the Relative Strength Index (RSI). More defensive S&P utilities index rose 0.9%, leading sector gains.

Also, the shares of The Boeing Company (BA) advanced 3.6% on news that Iranair might purchase more than 100 jets from the company. The UK’s FTSE index was trading lower by 0.02 percent, while French CAC 40 Index fell 0.37 percent. Valeant Pharmaceuticals International Inc. tumbled after it cut its 2016 profit forecast, citing “significant disruption” over the past nine months. The so-called “investor fear index” has shown signs of upward consolidation for the past two weeks. ChesapeakeEnergy Corp.(CHK) dropped 7.7%.

Chesapeake Energy (CHK.N) fell 5.4 percent after RBC downgraded the stock. South Korea’s Kospi climbed 1.3 percent. That’s helped fuel gains in commodity prices. United Kingdom industrial production increased 2 percent in April.

“The inability of the S&P to even hold key resistance tells you the market is not ready to break out to new record highs”, said Adam Sarhan, chief executive of Sarhan Capital in NY. The Nasdaq Biotech Index was down 2.5 per cent, its biggest daily per centage decline since May 11.

Tuesday’s note sale, the first of three Treasury offerings this week totaling $56 billion, comes after demand rose to the highest on record at a string of blockbuster auctions last month.

Ms. Yellen said that Fed officials expect the economy to improve but won’t raise interest rates until new uncertainties are resolved. Earlier in the day, the 10-year government bond yield dropped to minus 0.140 percent. Spain’s 10-year yield fell four basis points to 1.48 percent, while that on similar-maturity Italian securities slipped three basis points to 1.44 percent.