Stocks Close Firmly Negative Following Mixed Jobs Data - U.S. Commentary

(RTTNews) - After pulling back sharply in early trading on Friday, stocks regained some ground as the day progressed but still ended the session firmly in the red. The losses on the day partly offset the strong gains posted in the two previous sessions.

The major averages posted notable losses but were well off their worst levels. The Dow tumbled 170.50 points or 1 percent to 17,737.37, the Nasdaq fell 32.12 points or 0.7 percent to 4,704.07 and the S&P 500 slid 17.33 points or 0.8 percent to 2,044.81.

Following several volatile sessions, the major averages closed moderately lower for the week. The S&P 500 dropped by 0.7 percent, while the Dow and the Nasdaq both fell by 0.5 percent.

The weakness on Wall Street partly reflected a negative reaction to the Labor Department's closely watched monthly jobs report.

While a bigger than expected increase in employment contributed to a drop in the unemployment rate, the report also showed a slowdown in wage growth.

The Labor Department said non-farm payroll employment climbed by 252,000 jobs in December compared to economist estimates for an increase of about 245,000 jobs.

The stronger than expected job growth helped to push the unemployment rate down to a new six-year low of 5.6 percent.

However, the report also said the annual rate of average hourly earnings growth slowed to 1.7 percent in December, the slowest rate of growth since October of 2012.

The mixed data led to some uncertainty about the outlook for monetary policy, leading some traders to cash in on the recent gains.

Rob Carnell, chief international economist at ING, said, "If you want to raise rates, these numbers provide the ammunition you need in terms of payrolls and the unemployment rate. Historically, the Fed always thought full employment was at about a 5.3% rate."

"Against this, with even less wage inflation than was apparent last month, the doves can argue that the unemployment figures are biased and giving a misleading steer and argue against any near-term increase in rates," he added.

Negative sentiment was also generated by a pullback by the price of crude oil, which moved back to the downside after closing higher for two straight days.

Sector News

Financial stocks saw considerable weakness on the day after contributing to the strong upward moves seen in the two previous sessions.

Reflecting the weakness in the financial sector, the Dow Jones Banks Index and the NYSE Arca Broker/Dealer Index tumbled by 2 percent and 1.9 percent, respectively.

Significant weakness was also visible among oil service stocks, resulting in a 1.9 percent drop by the Philadelphia Oil Service Index. The weakness in the sector came as crude oil for February delivery slid $0.43 to $48.36 a barrel.

Retail, transportation, and steel stocks also saw notable weakness on the day, moving lower along with most of the other major sectors.

Meanwhile, gold stocks bucked the downtrend amid an increase by the price of the precious metal. With gold for February delivery climbing $7.60 to $1,216.10 an ounce, the NYSE Arca Gold Bugs Index surged up by 5 percent.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved mostly higher during trading on Friday. Japan's Nikkei 225 Index edged up by 0.2 percent, while Hong Kong's Hang Seng Index rose by 0.4 percent.

Meanwhile, the major European markets saw considerable weakness on the day. While the U.K.'s FTSE 100 Index dropped by 1.1 percent, the French CAC 40 Index and the German DAX Index both slumped by 1.9 percent.

In the bond market, treasuries gave back some ground after an early rally but managed to remain firmly positive. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, fell by 4.5 basis points to 1.971 percent.

Looking Ahead

Another batch of economic data could be in focus next week, with traders likely to keep an eye on reports on retail sales, industrial production, and producer and consumer price inflation.

Earnings news may also start to attract some attention, as aluminum giant Alcoa (AA) is set to unofficially kick off the reporting reason after the close of trading next Monday.