Stocks Close Mixed Following Upbeat Jobs Report - U.S. Commentary

(RTTNews) - Stocks turned in a lackluster performance throughout much of the trading session on Friday before eventually ending the session mixed. The choppy trading came on the heels of the sell-off that was seen in the previous session.

The major averages finished the day on opposite sides of the unchanged line. The Nasdaq crept up 9.33 points or 0.2 percent to 5,068.46, while the Dow fell 56.12 points or 0.3 percent to 17,849.46 and the S&P 500 slipped 3.01 points or 0.1 percent to 2,092.83.

Despite the mixed performance on the day, the major averages all moved lower for the week. While the Nasdaq edged down by less than a tenth of a percent, the Dow and the S&P 500 fell by 0.9 percent and 0.7 percent, respectively.

The lack of direction seen for most of the trading day came as traders digested the Labor Department's better than expected monthly jobs report.

The report said non-farm payroll employment jumped by 280,000 jobs in May compared to economist estimates for an increase of about 225,000 jobs.

While the increase in employment in April was downwardly revised to 221,000 jobs from 223,000 jobs, the employment growth in March was upwardly revised to 119,000 jobs from 85,000 jobs.

With these revisions, the Labor Department said employment gains in March and April combined were 32,000 more than previously reported.

The report also said the unemployment rate inched up to 5.5 percent in May from a nearly seven-year low of 5.4 percent in April, but the uptick primarily reflected an increase in the size of the labor force.

The upbeat data provides further evidence of an economic rebound in the second quarter but also led to renewed concerns about the outlook for interest rates.

Rob Carnell, chief international economist at ING, said, "Just when all the Fed speakers were sounding more and more cautious, in comes a strong labor market report and puts thoughts of tighter policy back on the agenda."

Carnell said the Federal Reserve is still unlikely to raise interest rates at its next meeting later this month, although he said a third quarter rate hike looks like a decent bet.

Traders also kept an eye on the latest developments in Greece, as the debt-plagued nation and its international creditors continue to struggle to reach an agreement.

Sector News

While many of the major sectors ended the day showing only modest moves, substantial weakness was visible among gold stocks. The NYSE Arca Gold Bugs Index fell 1.9 percent to its lowest closing level in well over two months.

The losses by gold stocks came amid a decrease by the price of the precious metal, as gold for August delivery slid $7.10 to $1,168.10 an ounce.

Tobacco stocks also saw significant weakness on the day, dragging the NYSE Arca Tobacco Index down by 1.9 percent. Altria (MO), Philip Morris (PM), and Reynolds American (RAI) turned in some of the tobacco sector's worst performances on the day.

Utilities, telecom, and commercial real estate stocks also moved notably lower on the day, although selling pressure was somewhat subdued.

Meanwhile, considerable strength was visible among oil service stocks, as reflected by the 1.7 percent gain posted by the Philadelphia Oil Service Index. The strength in the sector came as crude for July delivery jumped $1.13 to $59.13 a barrel.

Banking stocks also saw significant strength on the day, driving the Dow Jones Banks Index up by 1.6 percent to its best closing level in well over seven years. Trucking and brokerage stocks also posted notable gains.

Other Markets

In overseas trading, most of the major markets in the Asia-Pacific region moved lower on Friday. Japan's Nikkei 225 Index edged down by 0.1 percent and Hong Kong's Hang Seng Index slumped by 1.1 percent. However, China's Shanghai Composite Index bucked the downtrend and jumped 1.5 percent.

Meanwhile, the major European markets all showed notable moves the downside on the day. While the U.K.'s FTSE 100 Index fell by 0.8 percent, the French CAC 40 Index and the German DAX Index both tumbled by 1.3 percent.

In the bond market, treasuries pulled back sharply in reaction to the upbeat jobs data. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, jumped 9.5 basis points to an eight-month closing high of 2.402 percent.

Looking Ahead

The economic calendar for next week starts off relatively quiet, although key reports on retail sales and producer prices are likely to be in focus later in the week.