Stocks Remain Firmly Negative After Initial Drop – U.S. Commentary

After an initial move to the downside, stocks have remained mostly lower over the course of morning trading on Friday. Selling pressure has waned since the open, although the major averages are stuck firmly in negative territory.

The major averages have climbed off their worst levels of the day but are still notably lower. The Dow is down 146.77 points or 0.6 percent at 25,326.46, the Nasdaq is down 61.38 points or 0.8 percent at 7,360.09 and the S&P 500 is down 21.5 5 points or 0.8 percent at 2,727.38.

The initial weakness on Wall Street came after a report from the Labor Department revealed job growth nearly ground to a halt in February after soaring in January.

The Labor Department said non-farm payroll employment edged up by 20,000 jobs in February after jumping by an upwardly revised 311,000 jobs in January.

Economists had expected employment to increase by about 180,000 jobs compared to the spike of 304,000 jobs originally reported for the previous month.

The much weaker than expected job growth in February represented the worst month since the loss of 18,000 jobs in September of 2017, when employment was impacted by Hurricanes Harvey and Irma.

However, FTN Financial Chief Economist Chris Low said the stark contrast between the January and February data suggests a “seasonal adjustment breakdown rather than a change in economic performance.”

“The three month average, 186k, is respectable, and far more realistic than either the 311k rise in January or the 20k rise in February,” Low said.

The report also showed the unemployment rate dropped to 3.8 percent in February from 4.0 percent in January, while the annual rate of wage growth accelerated to 3.4 percent from 3.1 percent.

The jobs data has largely overshadowed a separate report from the Commerce Department showing a substantial rebound in housing starts in January.

The report said housing starts soared by 18.6 percent to an annual rate of 1.230 million in January after plunging by 14.0 percent to a revised rate of 1.037 million in December.

Economists had expected housing starts to jump by 11 percent to a rate of 1.197 million from the 1.078 million originally reported for the previous month.

The Commerce Department said building permits also rose by 1.4 percent to an annual rate of 1.345 million in January after inching up by 0.3 percent to 1.326 million in December.

Building permits, an indicator of future housing demand, had been expected to drop by 2.8 percent to a rate of 1.289 million.

Concerns about the global economy are also weighing on the markets after the European Central Bank downgraded its GDP forecasts and China reported weaker than expected trade data for February.

Energy stocks are seeing substantial weakness amid a steep drop by the price of crude oil, with crude for April delivery plunging $1.92 to $54.74 a barrel amid concerns about global demand.

Reflecting the weakness in the energy sector, the NYSE Arca Oil Index is down by 2.6 percent and the Philadelphia Oil Service Index and the NYSE Arca Natural Gas Index are both down by 2.5 percent.

Concerns about global demand are also weighing on the steel sector, as reflected by the 1.7 percent slump by the NYSE Arca Steel Index.

Biotechnology, transportation and semiconductor stocks are also seeing notable weakness, while gold stocks are bucking the downtrend amid a jump by the price of the precious metal.

In overseas trading, stock markets across the Asia-Pacific region moved sharply lower during trading on Friday. Japan’s Nikkei 225 Index slumped by 2 percent, while China’s Shanghai Composite Index plummeted by 4.4 percent.

The major European markets have also moved to the downside on the day. While the French CAC 40 Index has fallen by 0.8 percent, the U.K.’s FTSE 100 Index and the German DAX Index are both down by 0.7 percent.

In the bond market, treasuries have pulled back near the unchanged line after seeing initial strength. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, is up by less than a basis point at 2.638 percent.

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