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U.S. Stocks Closely Narrowly Mixed After Weaker Than Expected Jobs Data

wallstreet sept18 03sep21 lt

With traders showing some uncertainty about the repercussions of the Labor Department's monthly jobs, stocks turned in a lackluster performance during trading on Friday. Despite the choppy trading, the tech-heavy Nasdaq reached a new record closing high.

The major averages finished the day on opposite sides of the unchanged line. While the Nasdaq rose 32.34 points or 0.2 percent to 15,363.52, the Dow dipped 74.73 points or 0.2 percent to 35,369.09 and the S&P 500 edged down 1.52 points or less than a tenth of a percent to 4,535.43.

For the week, the Nasdaq jumped by 1.5 percent and the S&P 500 advance by 0.6 percent, although the Dow slipped by 0.2 percent.

The choppy trading on Wall Street came as traders digested the Labor Department's closely watched monthly employment report, which showed much weaker than expected job growth in the month of August.

The report suggests the delta variant of the coronavirus is weighing on the labor market, although the data could also lead the Federal Reserve to push back its plans to begin scaling back stimulus.

Fed officials have indicated inflation has reached their target but they need to see further improvement in the labor market before they begin tapering asset purchases and raising interest rates.

The Labor Department said non-farm payroll employment rose by 235,000 jobs in August after soaring by an upwardly revised 1.053 million jobs in July.

Economists had expected employment to jump by about 750,000 jobs compared to the spike of 943,000 jobs originally reported for the previous month.

Despite the much weaker than expected job growth, the unemployment rate fell to 5.2 percent in August from 5.4 percent in July, matching economist estimates.

"While the Delta variant is driving renewed virus fear, the labor market recovery seems unlikely to go into reverse," said Lydia Boussour, Lead US Economist at Oxford Economics. "Still, a slower pace of hiring amid a rapidly spreading Delta variant will warrant a patient tapering approach from the Fed."

She added, "We believe The FOMC will opt to wait until the November meeting to make a formal tapering announcement, and start reducing asset purchases in December or January, depending on employment progress and inflation developments this fall."

Meanwhile, a separate report released by the Institute for Supply Management showed U.S. service sector growth slowed from a record pace in the month of August.

The ISM said its services PMI fell to 61.7 in August after reaching an all-time high of 64.1 in July, although a reading above 50 still indicates growth in the sector. Economists had expected the index to drop to 61.5.

Sector News

Most of the major sectors ended the day showing only modest moves, contributing to the lackluster close by the broader markets.

Oil service stocks showed a significant move to the downside, however, with the Philadelphia Oil Service Index falling by 1.6 percent.

The weakness among oil service stocks came amid a pullback by the price of crude oil, as crude for October delivery slid $0.70 to $69.29 a barrel.

Airline stocks also saw notable weakness on the day, resulting in a 1.1 percent drop by the NYSE Arca Airline Index.

On the other hand, gold stocks moved sharply higher, driving the NYSE Arca Gold Bugs Index up by 2.6 percent to its best closing level in almost a month.

The rally by gold stocks came amid a sharp increase by the price of the precious metal, with gold December delivery jumping $22.20 to $1,833.70 an ounce.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region turned in another mixed performance during trading on Friday. Japan's Nikkei 225 Index spiked by 2.1 percent, while China's Shanghai Composite Index fell by 0.4 percent.

Meanwhile, the major European markets all moved lower over the course of the session. While the French CAC 40 Index slumped by 1.1 percent, the German DAX Index and the U.K.'s FTSE 100 Index both slid both 0.4 percent.

In the bond market, treasuries moved to the downside in reaction to the monthly jobs report. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, rose by 2.8 basis points at 1.322 percent.

Looking Ahead

Following the long holiday weekend, the economic calendar for next week is relatively quiet, although traders are likely to keep an eye on the Federal Reserve's Beige Book and a report on producer price inflation.

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