Stocks Fall Sharply Amid Negative Reaction To Jobs Report - U.S. Commentary

(RTTNews) - Reflecting a negative reaction to the closely watched monthly jobs report, stocks moved sharply lower during trading on Friday. With the steep drop on the day, the tech-heavy Nasdaq fell to its lowest closing level in well over a year.

The major averages closed firmly in the red, with the Nasdaq underperforming its counterparts. While the Nasdaq plummeted 146.42 points or 3.3 percent to 4,363.14, the Dow tumbled 211.75 points or 1.3 percent to 16,204.83 and the S&P 500 dove 35.43 points or 1.9 percent to 1,880.02.

For the week, the major averages also showed significant decreases. The Dow slumped by 1.6 percent, while the Nasdaq and the S&P 500 plunged by 5.4 percent and 3.1 percent, respectively.

The sell-off on Wall Street came following the release of a Labor Department report showing disappointing job growth in January but also a drop in the unemployment rate to a nearly eight-year low.

The Labor Department said non-farm payroll employment climbed by 151,000 jobs in January compared to economist estimates for an increase of about 188,000 jobs.

While the report also said the jump in employment in December was downwardly revised to 262,000 jobs from 292,000 jobs, the increase in employment in November was upwardly revised to 280,000 jobs from 252,000 jobs.

With the combined revisions, job growth in November and December was only 2,000 jobs lower than previously reported.

The Labor Department also said the unemployment rate edged down to 4.9 percent in January from 5.0 percent in December, while economists had expected the rate to come in unchanged.

The unexpected decrease pulled the unemployment rate down to its lowest level since a matching rate in February of 2008.

Analysts also highlighted a 0.5 percent increase in average hourly earnings, which led to some concerns about the outlook for interest rates.

Chris Low, chief economist at FTN Financial, said, "Fed officials have been anticipating slower payroll growth for months, so this slowdown is more likely to draw a sigh of relief from FOMC members than concern about potential collapse into weakness."

"Meanwhile, strong earnings growth and jobs strength in unexpected places like retail and manufacturing have the market on alert, too," he added.

A separate report from the Commerce Department showed that the U.S. trade deficit widened more than expected in December amid an increase in imports and a decrease in exports.

Sector News

Most of the major sectors came under pressure over the course of the trading session, reflecting broad based weakness on Wall Street.

Internet stocks posted particularly steep losses on the day, resulting in a 7.1 percent drop by the Dow Jones Internet Index. With the steep decline, the index ended the session at its lowest closing level in a year.

Red Hat (RHT), Netflix (NFLX), Amazon (AMZN), and Expedia (EXPE) turned in some of the internet sector's worst performances.

Substantial weakness was also visible among software stocks, as reflected by the 4.9 percent loss posted by the Dow Jones Software Index. The index tumbled to a four-month closing low.

Airline, semiconductor, networking and housing stocks also showed notable moves to the downside, while gold stocks were among the few groups to buck the downtrend.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region turned in a mixed performance during trading on Friday. Japan's Nikkei 225 Index slumped by 1.3 percent, while Hong Kong's Hang Seng Index advanced by 0.6 percent.

Meanwhile, the major European markets all moved to the downside on the day. While the German DAX Index tumbled by 1.1 percent, the U.K.'s FTSE 100 Index and the French CAC 40 Index fell by 0.9 percent and 0.7 percent, respectively.

In the bond market, treasuries saw some volatility during the session before closing modestly higher. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, edged down by 1.6 basis points to 1.848 percent.

Looking Ahead

Next week, traders are likely to keep an eye on remarks by Federal Reserve Chair Janet Yellen, who is scheduled to deliver her semi-annual testimony to Congress.

The economic calendar is relatively quiet for much of the week, but reports on retail sales, import and export prices, and consumer sentiment are all due to be released next Friday.

On the earnings front, Coca-Cola (KO), Disney (DIS), Time Warner (TWX), Cisco (CSCO), Twitter (TWTR), Kellogg (K), and PepsiCo (PEP) are among the companies due to report their quarterly results next week.