U.S. Stocks Finish Volatile Session In The Red Following Jobs Report

Stocks saw substantial volatility over the course of the trading session on Friday, with the major averages showing wild swings back and forth across the unchanged line following the release of the closely watched monthly jobs report.

The major averages moved to the downside going into the close and ended the day in negative territory. The Dow slid 187.38 points or 0.6 percent to 33,734.88, the Nasdaq edged down 18.37 points or 0.1 percent to 13,660.72 and the S&P 500 dipped 12.64 points or 0.3 percent to 4,398.95.

For the holiday-interrupted week, the Dow plunged by 2.0 percent, the S&P 500 tumbled by 1.2 percent and the Nasdaq slumped by 0.9 percent.

The volatility on Wall Street came after the Labor Department released a report showing U.S. employment increased by less than expected in the month of June.

The Labor Department said non-farm payroll employment jumped by 209,000 jobs in June, while economists had expected employment to shoot up by 225,000 jobs.

The report also showed the surges in employment in April and May were downwardly revised to 217,000 jobs and 306,000 jobs, respectively, reflecting a combined downward revision of 110,000.

Meanwhile, the Labor Department said the unemployment rate edged down to 3.6 percent in June from 3.7 percent in May, in line with economist estimates.

The report also showed annual wage growth remained elevated, coming in at 4.4 percent in June, unchanged from an upwardly revised reading in May.

Economists had expected the pace of growth to slow to 4.2 percent from the 4.3 percent originally reported for the previous month.

Following ADP’s report showing a much bigger than expected surge in private sector employment in June, the Labor Department report led to some uncertainty about the outlook for interest rates.

While the Federal Reserve is still widely expected to raise rates by another quarter point later this month, the outlook for further rate hikes is likely to be impacted by next week’s inflation data.

“A softer jobs report than widely expected has taken some of the steam out of recent market moves, but the labor market remains too tight for the Fed to relax,” said ING Chief International Economist James Knightley.

He added, “A July rate hike is coming, but labor data is the most lagging of indicators and softer inflation next week could see rate hike expectations for further out moderate a touch.”

Sector News

Despite the lower close by the broader markets, oil services skyrocketed on the day, driving the Philadelphia Oil Service Index up by 6.4 percent to its best closing level in four months.

The rally by oil service came amid a sharp increase by the price of crude oil, as crude for August delivery is jumping $1.60 to $73.40 a barrel.

Considerable strength was also visible among airline stocks, which rebounded after falling sharply in the previous session. Following the 3.8 percent nosedive on Wednesday, the NYSE Arca Airline Index soared by 2.7 percent.

Oil producer, steel and financial stocks also ended the day significantly higher, while pharmaceutical and healthcare stocks showed notable moves to the downside.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved mostly lower during trading on Friday. Japan’s Nikkei 225 Index tumbled by 1.2 percent, while Hong Kong’s Hang Seng Index fell by 0.9 percent.

Meanwhile, the major European markets turned in a mixed performance on the day. While the U.K.’s FTSE 100 Index fell by 0.3 percent, the French CAC 40 Index rose by 0.4 percent and the German DAX Index climbed by 0.5 percent.

In the bond market, treasuries showed a lack of direction over the course of the session before closing roughly flat. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, inched up by less than a basis point to 4.050 percent.

Looking Ahead

With the jobs report now in the rearview mirror, inflation data is likely to move into the spotlight next week, although earnings news from financial giants Citigroup (C), JPMorgan Chase (JPM) and Wells Fargo (WFC) may also attract attention.

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