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U.S. Stocks Move Sharply Lower Following Disappointing Jobs Report

wallstreet oct24 03dec21 lt

Stocks have moved sharply lower over the course of morning trading on Friday, partly offsetting the rally seen in the previous session. The major averages have all moved to the downside, with the tech-heavy Nasdaq showing a particularly steep drop.

Currently, the major averages are just off their lows of the session. The Dow is down 202.10 points or 0.6 percent at 34,437.69, the Nasdaq is down 282.04 points or 1.8 percent at 15,099.28 and the S&P 500 is down 46.00 points or 1 percent at 4,531.10.

The pullback on Wall Street extends the volatility seen throughout the week, with stocks showing wild swings back and forth in reaction to the latest news about the Omicron variant of the coronavirus.

After the first confirmed omicron case in the U.S. earlier in the week, the new variant has now been detected in at least five states.

Traders are also reacting to a closely watched report from the Labor Department showing much weaker than expected U.S. job growth in the month of November.

The report said non-farm payroll employment rose by 210,000 jobs in November after surging by an upwardly revised 546,000 jobs in October.

Economists had expected employment to spike by 550,000 jobs compared to the jump of 531,000 jobs originally reported for the previous month.

Despite the much weaker than expected job growth, the unemployment rate slid to 4.2 percent in November from 4.6 percent in October. Economists had expected the unemployment rate to edge down to 4.5 percent.

With the much bigger than expected decrease, the unemployment rate fell to its lowest level since hitting 3.5 percent in February of 2020.

While the disappointing job growth has raised some concerns about the economic outlook amid the emergence of the Omicron variant, economists do not expect the data to dissuade from the Federal Reserve from accelerating the tapering of its asset purchases.

"'Yes' the jobs report is strong enough for the Fed to announce a likely doubling of the pace of QE asset purchase tapering," said Gregory Daco, Chief U.S. Economist at Oxford Economics.

He added, "The Fed's pivot is aimed at providing hawkish forward guidance while clearing the runway for rate hikes anytime after March 2022."

Meanwhile, a separate report from the Institute for Supply Management showed an unexpected acceleration in the pace of growth in U.S. service sector activity in the month of November.

The ISM said its services PMI rose to a record high 69.1 in November from 66.7 in October, with a reading above 50 indicating growth in the sector. The increase surprised economists, who had expected the index to dip to 65.0.

Software stocks have moved sharply lower in morning trading, dragging the Dow Jones U.S. Software Index down by 3 percent to its lowest intraday level in well over a month.

DocuSign (DOCU) is posting a steep loss after the e-signature company reported fiscal third quarter results that beat expectations but provided disappointing revenue guidance.

Significant weakness has also emerged among biotechnology stocks, as reflected by the 1.7 percent drop by the NYSE Arca Biotechnology Index. The index is currently on pace to end the session at a one-year closing low.

Airline, banking and steel stocks are also seeing notable weakness, giving back ground after turning in some of the market's best performances on Thursday.

In overseas trading, stock markets across the Asia-Pacific region moved mostly higher during trading on Friday. Japan's Nikkei 225 Index jumped by 1 percent, while China's Shanghai Composite Index advanced by 0.9 percent.

Meanwhile, the major European markets have moved to the downside over the course of the session. While the U.K.'s FTSE 100 Index is down by 0.2 percent, the French CAC 40 Index and the German DAX Index are both down by 0.8 percent.

In the bond market, treasuries have fluctuated over the course of the morning and are currently seeing strength. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, is down by 3.1 basis points at 1.417 percent.

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