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Disappointing Jobs Data Contributes To Sell-Off On Wall Street - U.S. Commentary


After fluctuating early in the session, stocks moved sharply lower over the course of the trading day on Friday. The major averages showed a substantial move back to the downside following the rebound from early weakness seen in the previous session.

The major averages climbed off their worst levels going into the close but remained firmly negative. The Dow tumbled 558.72 points or 2.2 percent to 24,388.95, the Nasdaq plunged 219.01 points or 3.1 percent to 6,969.25 and the S&P 500 slumped 62.87 points or 2.3 percent to 2,633.08.

With the steep drop on the day, the major averages moved significantly lower for the week. The Nasdaq nosedived by 4.9 percent, while the Dow and the S&P 500 plummeted by 4.5 percent and 4.6 percent, respectively.

The sell-off on Wall Street came after the Labor Department's closely watched monthly jobs report showed U.S. employment increased by much less than expected in the month of November.

The Labor Department said non-farm payroll employment rose by 155,000 jobs in November after surging up by a downwardly revised 237,000 jobs in October.

Economists had expected employment to climb by about 200,000 jobs compared to the jump of 250,000 jobs originally reported for the previous month.

Meanwhile, the report said the unemployment rate in November remained unchanged for the second straight month at 3.7 percent, holding at its lowest level since hitting 3.5 percent in December of 1969.

Average hourly employee earnings rose by $0.06 to $27.35 in November, reflecting a 3.1 percent increase compared to the same month a year ago. The annual rate of growth was unchanged from October.

"The slightly more modest 155,000 gain in payroll employment in November may not go down well in markets given the heightened nervousness in recent months," said Paul Ashworth, Chief U.S. Economist at Capital Economics.

"But this is still a solid gain that suggests economic growth is gradually slowing back towards its potential pace," he added. "There is nothing here to suggest the economy is suffering a more sudden downturn."

Lingering skepticism about a U.S.-China trade agreement also weighed on the markets even though President Donald Trump tweeted, "China talks are going very well!"

Sector News

Most of the major sectors showed notable moves to the downside over the course of the session, reflecting a broad based sell-off on Wall Street.

Computer hardware stocks showed a particularly steep drop on the day, dragging the NYSE Arca Computer Hardware Index down by 4.1 percent to a nearly two-year closing low.

Tech giant IBM Corp. (IBM) posted a significant loss after agreeing to sell some of its software products to India-based HCL Technologies for $1.8 billion.

Substantial weakness was also visible among transportation stocks, as reflected by the 3.9 percent nosedive by the Dow Jones Transpiration Average. The average tumbled to its lowest closing level in well over a month.

Semiconductor, software, biotechnology, and retail stocks also saw considerable weakness, while gold stocks were among the few groups to buck the downtrend amid an increase by the price of the precious metal.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved mostly higher during trading on Friday. Japan's Nikkei 225 Index advanced by 0.8 percent, while Australia's S&P/ASX 200 Index rose by 0.4 percent.

European stocks also moved mostly higher on the day, although the German DAX Index edged down by 0.2 percent. While the French CAC 40 Index advanced by 0.7 percent, the U.K.'s FTSE 100 Index jumped by 1.1 percent.

In the bond market, treasuries rebounded over the course of the session after seeing early weakness. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, fell by 2.6 basis points to a three-month closing low of 2.850 percent after reaching a high of 2.910 percent.

Looking Ahead

Following the slew of U.S. economic data released over the past couple days, the economic calendar for next week is relatively light.

Traders are still likely to keep a close eye on reports on retail sales, industrial production, and producer and consumer price inflation.

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