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Major Averages Posting Modest Losses In Morning Trading - U.S. Commentary

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After initially moving to the downside, stocks continue to see modest weakness in morning trading on Friday. Selling pressure has remained relatively subdued, however, limiting the downside for the major averages.

Currently, the major averages remain in the red, pulling back off yesterday's record closing highs. The Dow is down 32.87 points or 0.1 percent at 22,742.52, the Nasdaq is down 9.54 points or 0.1 percent at 6,575.82 and the S&P 500 is down 6.08 points or 0.2 percent at 2,545.99.

The modest weakness on Wall Street comes following the release of a report from the Labor Department showing an unexpected drop in employment in the month of September.

The report said non-farm payroll employment fell by 33,000 jobs in September after climbing by an upwardly revised 169,000 jobs in August.

The modest decrease surprised economists, who had expected employment to rise by 90,000 jobs compared to the addition of 156,000 jobs originally reported for the previous month.

The Labor Department said a sharp decline in employment in food services and drinking places and below-trend growth in some other industries likely reflected the impact of Hurricanes Harvey and Irma.

Despite the unexpected drop in employment, the unemployment rate dipped to 4.2 percent in September from 4.4 percent in August. Economists had expected the unemployment rate to hold at 4.4 percent.

With the unexpected decrease, the unemployment rate fell to its lowest level since hitting a matching rate in February of 2001.

The report also showed a notable acceleration in the pace of wage growth, as average hourly employee earnings were up by 2.9 percent year-over-year in September compared to 2.5 percent in August.

Paul Ashworth, Chief U.S. Economist at Capital Economics, said the 0.5 percent monthly increase in wages came as many low-paid restaurant workers were temporarily out of a job.

"Overall, the Fed and the markets will just ignore this report," Ashworth said. "If past-storms, particularly Katrina, are any guide, employment will rebound markedly over the next few months."

He added, "The drop in the unemployment rate might persist, however, with consumer and small business surveys both pointing to a drop in the unemployment rate to nearer 4% for some time."

Most of the major sectors are showing only modest moves on the day, contributing to the lackluster performance by the broader markets.

Energy stocks have come under pressure, however, with a steep drop by the price of crude oil weighing on the sector. Crude for November delivery is tumbling $1.32 to $49.47 a barrel.

Reflecting the weakness in the energy sector, the Philadelphia Oil Service Index and the NYSE Arca Natural Gas Index are down by 1.6 percent and 1.3 percent, respectively.

In overseas trading, stock markets across the Asia-Pacific region moved to the upside during trading on Friday. Japan's Nikkei 225 Index and Hong Kong's Hang Seng Index both rose by 0.3 percent. Markets in mainland China remained closed.

Meanwhile, the major European markets are turning in a mixed performance on the day. While the French CAC 40 Index is down by 0.4 percent, the U.K.'s FTSE 100 Index is up by 0.1 percent and the German DAX Index is just above the unchanged line.

In the bond market, treasuries have climbed off their worst levels but continue to see moderate weakness. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, is up by 3.4 basis points at 2.384 percent.

by RTT Staff Writer

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