Stocks Close Sharply Higher After Recovering From Initial Drop - U.S. Commentary

(RTTNews) - After falling sharply at the open, stocks staged a remarkable turnaround over the course of the trading day on Friday. The major averages bounced well off their lows for the session and into positive territory, with the Dow showing a nearly 460-point swing on the day.

Going into the close, the major averages saw further upside, ending the session at their best levels of the day. The Dow jumped 200.36 points or 1.2 percent to 16,472.37, the Nasdaq soared 80.69 points or 1.7 percent to 4,707.78 and the S&P 500 surged up 27.54 points or 1.4 percent to 1,951.36.

With the turnaround on the day, the major averages all moved higher for the week. The Nasdaq rose by 0.5 percent, while the Dow and the S&P 500 both advanced by 1 percent.

The sell-off seen at the start of trading came following the release of a report from the Labor Department showing much weaker than expected job growth in the month of September.

The report said non-farm payroll employment rose by 142,000 jobs in September, well below economist estimates for an increase of about 203,000 jobs.

Job growth in July and August was also downwardly revised to 223,000 and 136,000, respectively, reflecting a net downward revision of 59,000 jobs.

The disappointing data added to recent concerns about the impact that overseas weakness is having on the U.S. economy.

Selling pressure waned not long after the open, however, as the weaker than expected job growth also shored up expectations that the Federal Reserve will hold off on raising interest rates later this month.

Rob Carnell, chief international economist at ING, said, "For once, these labor market numbers gave an unambiguous result. The problem is that it was unambiguously negative."

"No rate hike this month then it seems," he added. "But it raises doubts too about the probability of a December hike, unless the Fed changes the basis upon which it decided policy rates."

Traders subsequently picked up stocks at reduced levels amid optimism that the uncertainty about the outlook for rates can be put on the back burner for a while.

Among individual stocks, shares of Barracuda Networks (CUDA) ended the day sharply higher after the data security company announced a $50 million stock buyback program.

Chip maker Micron Technology (MU) also posted a strong gain after reporting better than expected fourth quarter adjusted earnings and net sales.

On the other hand, shares of Progress Software (PRGS) came under pressure after the business software maker reported better than expected third quarter earnings but lowered its full-year revenue guidance.

Sector News

Most of the major sectors turned higher over the course of the trading day, with gold stocks showing a particularly strong move to the upside. Reflecting the strength in the sector, the NYSE Arca Gold Bugs Index shot up by 8.3 percent.

The rally by gold stocks came amid a sharp increase by the price of the precious metal, as gold for December delivery jumped $22.90 to $1,136.60 an ounce.

Energy stocks also moved sharply higher as the day progressed, benefiting from an increase by the price of crude oil. Crude for November delivery ended the day up $0.80 at $45.54 a barrel.

Steel, biotechnology, electronic storage, and telecom also ended the session notably higher, while some weakness remained visible among financial stocks.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region turned in a mixed performance during trading on Friday. Hong Kong's Hang Seng Index surged up by 3.2 percent, while Australia's All Ordinaries Index slumped by 1.1 percent. Japan's Nikkei 225 Index closed nearly flat.

Meanwhile, the major European markets all ended the day on the upside. While the U.K.'s FTSE 100 Index advanced by 1 percent, the French CAC 40 Index and the German DAX Index climbed by 0.7 percent and 0.5 percent, respectively.

In the bond market, treasuries spiked higher in reaction to the jobs report but closed well off their best levels. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, fell by 5.3 basis points to 1.989 percent after hitting a low of 1.906 percent.

Looking Ahead

Following the slew of U.S. economic data released over the past week, the economic calendar for next week is relatively light.

Traders are still likely to keep an eye on reports on service sector activity, international trade, and import and exports prices as well as the minutes of the most recent Fed meeting.

Aluminum giant Alcoa (AA) is also scheduled to release its third quarter results after the close of trading next Thursday, marking the unofficial start of earnings season.