After a failed recovery attempt from initial weakness, stocks have seen further downside over the course of the trading session on Friday. With the pullback on the day, the major averages have more than offset the rebound seen in the previous session.

The major averages have climbed off their worst levels in recent trading but remain sharply lower. The Dow is down 396.80 points or 1.3 percent at 30,206.56, the Nasdaq is down 133.16 points or 1 percent at 13,203.99 and the S&P 500 is down 47.34 points or 1.3 percent at 3,740.04.

The pullback on Wall Street partly reflects concerns about recent market volatility as traders keep a close eye on heavily shorted stocks like GameStop (GME) and AMC Entertainment (AMC).

GameStop and AMC Entertainment are soaring on the day after Robinhood eased restrictions on certain stocks that have skyrocketed in recent trading.

The spikes by the heavily shorted stocks have been described as a “retail investor revolt,” raising concerns hedge funds may have to sell other securities to make up for their losses.

Negative sentiment was also generated in reaction to news that Johnson & Johnson’s (JNJ) one-dose coronavirus vaccine appears to be less potent against variants.

J&J said the vaccine demonstrated 72 percent effectiveness in the U.S. compared to 66 percent in Latin America and 57 percent in South Africa.

In U.S. economic news, the Commerce Department released a report showing a much bigger than expected increase in U.S. personal income in the month of December, although the report also showed a modest decrease in personal spending.

The report said personal income climbed by 0.6 percent in December after tumbling by a downwardly revised 1.3 percent in November.

Economists had expected personal income to inch up by 0.1 percent compared to the 1.1 percent slump originally reported for the previous month.

Meanwhile, the Commerce Department said personal spending dipped by 0.2 percent in December after falling by a downwardly revised 0.7 percent in November.

Economists had expected spending to decrease by 0.4 percent, matching the drop originally reported for the previous month.

The University of Michigan also released a report showing consumer sentiment deteriorated by slightly more than initially estimated in the month of January.

The report said the consumer sentiment index for January was downwardly revised to 79.0 from the preliminary reading of 79.2.

Economists had expected the consumer sentiment index to be unrevised from the preliminary reading, which was still down from 80.7 in December.

Sector News

Steel stocks continue to turn in some of the market’s worst performances in mid-day trading, resulting in a 2.4 percent slump by the NYSE Arca Steel Index. The index is on pace to end the session at its lowest closing level in well over a month.

Substantial weakness has also emerged among airline stocks, as reflected by the 2.4 percent nosedive by the NYSE Arca Airline Index.

Oil stocks are also seeing considerable weakness on the day, dragging the NYSE Arca Oil Index down by 2 percent. The weakness in the sector comes despite an uptick by the price of crude oil.

A report showing a continued decrease in pending home sales is also weighing on the housing sector, with the Philadelphia Housing Sector Index tumbled by 1.9 percent.

Chemical, pharmaceutical and banking stocks are also seeing significant weakness, while gold and biotechnology stocks are among the few groups bucking the downtrend.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved notably lower during trading on Friday. Japan’s Nikkei 225 Index tumbled by 1.9 percent, while South Korea’s Kospi plummeted by 3 percent.

The major European markets also showed significant moves to the downside on the day. While the French CAC 40 Index plunged by 2 percent, the U.K.’s FTSE 100 Index and the German DAX Index slumped by 1.8 percent and 1.7 percent, respectively.

In the bond market, treasuries have climbed off their worst levels but continue to see modest weakness. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, is up by 1.9 basis points at 1.076 percent.

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