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Modest Weakness Remains Visible On Wall Street - U.S. Commentary


Selling pressure has remained relatively subdued, but stocks continue to see modest weakness in mid-day trading on Friday. With the drop on the day, the major averages are pulling back off the record closing highs set in the previous session.

Currently, the major averages are lingering in negative territory. The Dow is down 38.92 points or 0.2 percent at 22,736.46, the Nasdaq is down 9.67 points or 0.2 percent at 6,575.68 and the S&P 500 is down 7.00 points or 0.3 percent at 2,545.07.

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."

Sector News

Most of the major sectors are showing only modest moves on the day, although energy stocks are seeing considerable weakness amid a steep drop by the price of crude oil.

Crude oil for November delivery has plunged $1.33 to $49.46 a barrel after climbing $0.81 to $50.79 a barrel on Thursday, with the pullback attributed to renewed oversupply concerns.

Reflecting the weakness in the energy sector, the Philadelphia Oil Service Index is down by 1.6 percent, the NYSE Arca Natural Gas Index is down by 1.3 percent and the NYSE Arca Oil & Gas Index is down by 1 percent.

Railroad, steel, and telecom stocks have also moved to the downside on the day, while gold stocks are moving sharply higher amid an increase by the price of the precious metal.

Other Markets

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 turned in a mixed performance on the day. While the U.K.'s FTSE 100 Index edged up by 0.2 percent, the French CAC 40 Index fell by 0.4 percent and the German DAX Index dipped by 0.1 percent.

In the bond market, treasuries have shown a significant recovery attempt after an early move to the downside. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, is up by less than a basis point at 2.355 percent.

by RTTNews Staff Writer

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