Nasdaq Posting Slim Gain, Dow And S&P 500 Remain Modestly Lower

After showing a lack of direction early in the session, stocks continue to turn in a lackluster performance in early afternoon trading on Friday. While the Nasdaq has edged slightly higher after seeing initial weakness, the Dow and the S&P 500 remain modestly lower.

Currently, the major averages continue to turn in a mixed performance. The Nasdaq is up 20.40 points or 0.1 percent at 15,351.57, but the Dow is down 96.82 points or 0.3 percent at 35,347.00 and the S&P 500 is down 4.23 points or 0.1 percent at 4,532.72.

The choppy trading on Wall Street comes as traders react to 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

Oil service stocks have moved significantly lower over the course of the session, resulting in a 1.6 percent drop by the Philadelphia Oil Service Index.

The weakness among oil service stocks comes amid a decrease by the price of crude oil, with crude for October delivery falling $0.43 to $69.56 a barrel.

Considerable weakness has also emerged among airline stocks, as reflected by the 1.5 percent loss being posted by the NYSE Arca Airline Index.

Housing stocks have also shown a notable move to the downside on the day, dragging the Philadelphia Housing Sector Index down by 1.2 percent.

On the other hand, gold stocks are seeing substantial in afternoon trading, with the NYSE Arca Gold Bugs Index surging up by 2.5 percent.

The rally by gold stocks comes amid a sharp increase by the price of the precious metal, as gold for December delivery is jumping $21.20 to $1,832.70 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 have 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, is up by 2.8 basis points at 1.322 percent.

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