With traders shrugging off a better than expected jobs report amid lingering concerns about the global economic outlook, stocks moved sharply lower over the course of the trading day on Friday, largely offsetting yesterday's strong gains.
The major averages saw further downside going into the close, ending the session near their worst levels of the day. The Dow slid 139.46 points or 1.1 percent to 13,093.16, the Nasdaq tumbled 37.93 points or 1.3 percent to 2,982.13 and the S&P 500 fell 13.39 points or 0.9 percent to 1,414.20.
As a result of the losses on the day, the major averages were nearly flat for the abbreviated trading week. While the S&P 500 inched up by 0.2 percent, the Dow and the Nasdaq edged down by 0.1 percent and 0.2 percent, respectively.
The pullback by stocks came despite the release of a report from the Labor Department showing that the U.S. economy added more jobs than anticipated in the month of October.
The report said non-farm payroll employment increased by 171,000 jobs in October following an upwardly revised increase of 148,000 jobs in September.
Economists had expected employment to increase by about 125,000 jobs compared to the increase of 114,000 jobs originally reported for the previous month.
Despite the continued job growth, the unemployment rate edged up to 7.9 percent in October from 7.8 percent in September due to an increase by the size of the workforce. The modest increase by the unemployment rate matched economist estimates.
James Knightley, senior economist at ING, said, "Over the past week we have seen GDP, the ISM report, construction activity, confidence and the employment report point to a strengthening U.S. economy."
"With the unemployment rate trending downwards and the economy adding jobs this is boosting incomes and the feeling of job security," he added.
While the report helped to push stocks higher at the start of trading, buying interest waned not long after the open.
Even though the job growth surpassed expectations, concerns about the global economic outlook continued to weigh on investor sentiment.
Some traders also felt that the upbeat data was priced into the markets with yesterday's rally and looked to do some profit taking.
Gold stocks showed a particularly sharp move to the downside, moving lower along with the price of the precious metal. With gold for December delivery tumbling $40.30 to $1,675.20 an ounce, the NYSE Arca Gold Bugs Index plummeted 4.5 percent.
Significant weakness was also visible among networking stocks, as reflected by the 2.5 percent loss posted by the NYSE Arca Networking Index. Alcatel-Lucent (ALU) helped to lead the sector lower, falling by 9.9 after reporting disappointing third quarter results.
Computer hardware stocks also came under considerable selling pressure on the day, dragging the NYSE Arca Computer Hardware Index down by 1.9 percent. Logitech (LOGI) and Apple (AAPL) turned in two of the sector's worst performances.
Steel, housing, semiconductor, and oil service stocks also posted notable losses, while some strength remained visible among commercial real estate stocks.
In overseas trading, stock markets across the Asia-Pacific region moved notably higher during trading on Friday, benefiting from the overnight rally on Wall Street. Japan's Nikkei 225 Index advanced by 1.2 percent, while Hong Kong's Hang Seng Index surged up by 1.3 percent.
The major European markets also moved to the upside over the course of the trading day. While the U.K.'s FTSE 100 Index edged up by 0.1 percent, the German DAX Index and the French CAC 40 Index rose by 0.4 percent and 0.5 percent, respectively.
In the bond market, treasuries ended the session modestly lower but well off their worst levels of the day. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, edged up 1.1 basis points to 1.726 percent after reaching a high of 1.779 percent.
Next week, traders are likely to keep a close eye on the outcome of the presidential race between President Barack Obama and Republican challenger Mitt Romney.
In the short-term, investors will be looking for a definitive outcome from the election when trading opens next Wednesday, as a race that is still too close to call or requires a recount will generate considerable uncertainty.
Trading could also be impacted by some key economic data, including reports on service sector activity, the U.S. trade balance, and consumer sentiment.
On the earnings front, Disney (DIS), Time Warner (TWX), Qualcomm (QCOM), Kraft Foods (KRFT), and Prudential (PRU) are among the big-name companies scheduled to release their quarterly results next week.
by RTT Staff Writer
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