U.S. Stocks Turn In Lackluster Performance Following Mixed Jobs Data

Stocks moved mostly higher in early trading on Friday but quickly gave back ground and showed a lack of direction over the remainder of the session. The major averages pulled back off their early highs and spent much of the day lingering near the unchanged line.

The Dow managed to spend most of the day in positive territory before closing up 115.80 points or 0.3 percent at 34,837.71. The S&P 500 also rose 8.11 points or 0.2 percent to 4,515.77, while the Nasdaq edged down 3.15 points or less than a tenth of a percent to 14,031.81, snapping a five-day winning streak.

Nonetheless, the major averages all posted strong gains for the week. While the Nasdaq spiked 3.3 percent, the S&P 500 surged 2.5 percent and the Dow jumped by 1.4 percent.

The lackluster performance on Wall Street came following the release of a mixed employment from the Labor Department.

While the closely watched report showed modestly stronger than expected job growth in the month of August, the report also showed an unexpected increase in the unemployment rate.

The Labor Department said employment climbed by 187,000 jobs in August compared to economist estimates for the addition of 170,000 jobs.

Meanwhile, the report said the unemployment rate climbed to 3.8 percent in August from 3.5 percent in July. Economists had expected the unemployment rate to remain unchanged.

With the unexpected increase, the unemployment rate reached its highest level since hitting a matching rate in March 2022.

The advance by the unemployment rate came as the size of the labor force surged by 736,000 persons, while the household survey measure of employment rose by 222,000 persons.

The increase in the unemployment rate added to optimism about the Federal Reserve leaving interest rates unchanged later this month, but traders continued to express some uncertainty about future meetings.

“An uptick in the unemployment rate and moderation of payroll and wage growth mean the Fed is very likely to hold their policy rate steady at the decision later this month,” said Bill Adams, Chief Economist for Comerica Bank.

However, he added, “A rate hike is still possible at the Fed’s November 1 decision if some combination of wage growth, economic growth, or inflation surprise to the upside between now and then.”

CME Group’s FedWatch Tool is indicating a 93.0 percent chance the Fed will leave rates unchanged this month but still indicates a 33.9 percent chance of a rate hike in November.

In other economic news, the Institute for Supply Management released a report showing a slowdown in the pace of contraction in U.S. manufacturing activity.

The ISM said its manufacturing PMI rose to 47.6 in August from 46.4 in July, although a reading below 50 still indicates a contraction. Economists had expected the index to inch up to 47.0.

Sector News

Despite the lackluster performance by the broader markets, computer hardware stocks moved sharply higher on the day, resulting in a 4.0 percent spike by the NYSE Arca Computer Hardware Index.

Dell Technologies (DELL) posted a standout gain, with the computer company soaring by 21.3 percent after reporting better than expected fiscal second quarter results.

Energy stocks also showed a substantial move to the upside, moving sharply higher along with the price of crude oil.

With crude for October delivery jumping $1.92 to $85.55 a barrel, the Philadelphia Oil Service Index surged by 3.1 percent and the NYSE Arca Oil Index shot up by 2.1 percent.

Steel, financial and housing stocks also saw notable strength on the day, moving higher along with most of the other major sectors.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved mostly higher, with trading Hong Kong suspended due to Typhoon Saola. Japan’s Nikkei 225 Index rose by 0.3 percent, while China’s Shanghai Composite Index climbed by 0.4 percent.

Meanwhile, the major European markets turned in a mixed performance on the day. While the U.K.’s FTSE 100 Index increased by 0.3 percent, the French CAC 40 Index fell by 0.3 percent and the German DAX Index slid by 0.7 percent.

In the bond market, treasuries came under pressure after an initial move to the upside. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, jumped 8.0 basis points to 4.173 percent.

Looking Ahead

Following the long Labor Day weekend, next week’s trading may be impacted by reaction to reports on the U.S. trade deficit, factory orders and service sector activity as well as the Federal Reserve’s Beige Book.

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