Stocks Extend Sell-Off Following Slew Of Economic Data - U.S. Commentary

(RTTNews) - While selling pressure was relatively subdued compared to the previous session, stocks moved mostly lower during trading on Friday. The losses on the day extended yesterday's sell-off, with the Dow and the S&P 500 falling to two-month closing lows.

The major averages ended the day moderately lower but well off their worst levels of the session. The Dow fell 69.93 points or 0.4 percent to 16,493.37, the Nasdaq slid 17.13 points or 0.4 percent to 4,352.64 and the S&P 500 dipped 5.52 points or 0.3 percent to 1,925.15.

For the week, the major averages all showed sharp moves to the downside. The Dow and the S&P 500 tumbled by 2.8 percent and 2.7 percent, respectively, while the Nasdaq slumped by 2.2 percent.

The continued weakness on Wall Street came following the release of a slew of U.S. economic data, including the Labor Department's closely watched monthly jobs report.

The Labor Department said employment rose by 209,000 jobs in July after jumping by an upwardly revised 298,000 in June, while economists had expected an increase of 233,000 jobs.

Despite the continued job growth, the Labor Department also said the unemployment rate unexpectedly edged up to 6.2 percent in July from a nearly six-year low of 6.1 percent in June.

The report also showed only a modest uptick in average hourly earnings, easing some of the recent concerns about the outlook for interest rates.

However, a separate report from the Institute for Supply Management showed that activity in the manufacturing sector expanded at a notably faster rate in the month of July.

The ISM said its purchasing managers index climbed to 57.1 in July from 55.3 in June, with a reading above 50 indicating growth in the manufacturing sector. Economists had been expecting the index to edge up to a reading of 56.0.

With the bigger than expected increase, the manufacturing index came in just above last November's reading of 57.0 and hit its highest level since reaching 58.9 in April of 2011.

Peter Boockvar, chief market analyst at the Lindsey Group, said, "From the Fed's perspective on today's data, they got a temporary respite from the 'behind the curve' crowd after the payroll data, but the ISM is further evidence that this respite will be temporary."

Meanwhile, traders largely shrugged off separate reports on personal income and spending, consumer sentiment, and construction spending.

Sector News

After helping to lead the markets lower in the previous session, networking stocks showed another notable move to the downside. The NYSE Arca Networking Index tumbled 1.9 percent to a seven-month closing low.

Within the networking sector, Arris Group (ARRS) plunged by 14.3 percent despite reporting better than expected second quarter results and providing upbeat guidance.

Significant weakness was also visible among banking stocks, as reflected by the 1.5 percent loss posted by the Dow Jones Banks Index. Financial giant JP Morgan (JPM) turned in one of the sector's worst performances, falling by 2.1 percent.

Computer hardware stocks also added to yesterday's steep losses, with the NYSE Arca Computer Hardware Index falling by 1.1 percent. With the loss, the index pulled back further off the record closing high it set on Wednesday.

Telecom, software, and brokerage stocks also saw continued weakness on the day, while gold stocks moved higher along with the price of the precious metal.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region came under pressure following the overnight sell-off on Wall Street. Japan's Nikkei 225 Index. Japan's Nikki 225 Index fell by 0.6 percent, while Hong Kong's Hang Seng Index dropped by 0.9 percent.

The major European markets also moved to the downside on the day. While the German DAX Index plunged by 2.1 percent, the French CAC 40 Index tumbled by 1 percent and the U.K.'s FTSE 100 Index slid by 0.8 percent.

In the bond market, treasuries moved notably higher in reaction to the monthly jobs report. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, fell by 5.1 basis points to 2.505 percent.

Looking Ahead

Following the slew of economic data released over the past week, the economic calendar for next week is relatively quiet.

Nonetheless, traders are likely to keep an eye on reports on service sector activity, international trade, and labor productivity and costs.

Disney (DIS), Time Warner (TWX), Office Depot (ODP), Activision Blizzard (ATVI), and Molson Coors (TAP) are also among the companies due to report their quarterly results next week.