U.S. stocks fall after two-day rally

U.S. stocks traded mostly lower in the morning session on Friday, after two-day market rally, as global financial volatility continued to weigh on investors' sentiment.

At midday, the Dow Jones Industrial Average lost 68.68 points, or 0.41 percent, to 16,586.09. The S&P 500 dropped 5.66 points, or 0.28 percent, to 1,982.00. The Nasdaq Composite Index was down 10.03 points, or 0.21 percent, to 4,802.67.

Chinese stocks recovered more than 10 percent in two days after a five-day losing streak that wiped out a fifth of the market value.

The benchmark Shanghai Composite Index climbed 4.82 percent to close at 3,232.35 points on Friday, following a 5.34-percent rebound the previous day.

But European trade was cautious on Friday with markets narrowly lower as investors remained cautious.

On the economic front, U.S. personal income increased 0.4 percent, and disposable personal income rose 0.5 percent, in July, according to the U.S. Commerce Department Friday.

The same month has also seen the world's largest economy's personal consumption expenditures increase 0.3 percent after an upwardly revised 0.3 percent rise in June.

Meanwhile, the final reading of Thomson Reuters/ University of Michigan's consumer sentiment index came in at 91.9 for August, well below market estimates.

Some analysts said recent data points to a possible interest rate hike this year.

The U.S. Commerce Department on Thursday revised its estimate for the real gross domestic product (GDP) in the second quarter to a growth of 3.7 percent, which is much higher than the 0.6-percent growth in the first quarter and which has triggered a jump in U.S. stocks that day. Endit