Stocks Stuck Firmly In The Red Following Early Weakness - U.S. Commentary

(RTTNews) - After coming under pressure early in the session, stocks continue to see significant weakness in mid-day trading on Friday. The losses on the day come after the major averages ended the previous session on opposite sides of the unchanged line.

The major averages have moved roughly sideways in recent trading, stuck firmly in negative territory. The Dow is down 256.35 points or 1.6 percent at 16,118.41, the Nasdaq is down 39.24 points or 0.8 percent at 4,694.26 and the S&P 500 is down 27.16 points or 1.4 percent at 1,923.97.

The weakness on Wall Street comes as the Labor Department's monthly jobs report offered mixed data, adding to recent uncertainty about the outlook for interest rates.

The report showed much weaker than expected job growth in August but also a drop in the unemployment rate and an increase in wages.

The Labor Department said non-farm payroll employment climbed by 173,000 jobs in August, well below the increase of 220,000 jobs anticipated by economists.

However, the report also showed upward revisions to the job growth seen in both June and July, with the revised data showing increases of 245,000 jobs in each month.

With the upward revisions, employment gains in June and July combined were 44,000 more than previously reported.

The report also said the unemployment rate edged down to 5.1 percent in August from 5.3 percent in July, hitting its lowest level since April of 2008.

Additionally, the Labor Department said average hourly employee earnings climbed 0.3 percent to $25.09 in August, reflecting a 2.2 percent year-over-year increase.

Rob Carnell, chief international economist at ING, said, "These labor market reports are often difficult to interpret. This one is more than usually unhelpful."

"Markets will likely bounce around on the back of this as they try to work it out," he added. "And if the Fed was hoping for a nice clean steer before the September FOMC meeting, they did not get it today."

The mixed data is likely to increase the focus on the other economic reports due to be released in the weeks leading up to the Federal Reserve's next monetary policy announcement on September 17th.

Sector News

While most of the major sectors have come under pressure on the day, steel stocks have shown a particularly steep drop. Reflecting the weakness in the sector, the NYSE Arca Steel Index has plunged by 3.3 percent.

Schnitzer Steel (SCHN), AK Steel (AKS), and ArcelorMittal (MT) are turning in some of the steel sector's worst performances.

Gold stocks also continue to see considerable weakness in mid-day trading, with the NYSE Arca Gold Bugs Index tumbling by 2.5 percent. The weakness in the sector comes as gold for December delivery is falling $4.70 to $1,119.80 an ounce.

Significant weakness also remains visible among banking stocks, as reflected by the 2.1 percent loss being posted by the Dow Jones Banks Index. Wells Fargo (WFC) and JP Morgan (JPM) are posting steep losses.

Energy, telecom, pharmaceutical, and software stocks are also seeing notable weakness, while airline stocks are among the few groups bucking the downtrend.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved mostly lower during trading on Friday. Japan's Nikkei 225 Index tumbled by 2.2 percent, while Hong Kong's Hang Seng Index fell by 0.5 percent.

The major European markets also came under pressure following yesterday's rally. While the U.K.'s FTSE 100 Index slumped 2.4 percent, the German DAX Index and the French CAC 40 Index plunged 2.7 percent and 2.8 percent, respectively.

In the bond market, treasuries are seeing modest strength on the heels of the mixed jobs data. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, is down by 2.4 basis points at 2.144 percent.