U.S. Stocks Turning In Lackluster Performance After Weaker Than Expected Jobs Data

After moving to the downside early in the session, stocks have shown a lack of direction over the course of morning trading on Friday. The major averages have climbed well off their early lows, with the tech-heavy Nasdaq reaching positive territory.

Currently, the major averages are on opposite sides of the unchanged line. While the Nasdaq is up 23.68 points or 0.2 percent at 15,354.85, the Dow is down 69.30 points or 0.2 percent at 35,374.52 and the S&P 500 is down 2.52 points or 0.1 percent at 4,534.43.

The choppy trading on Wall Street comes as traders react to the Labor Department’s closely watched monthly employment report, which showed much weaker than expected job growth in the month of August.

The report suggests the delta variant of the coronavirus is weighing on the labor market, although the data could also lead the Federal Reserve to push back its plans to begin scaling back stimulus.

Fed officials have indicated inflation has reached their target but they need to see further improvement in the labor market before they begin tapering asset purchases and raising interest rates.

The Labor Department said non-farm payroll employment rose by 235,000 jobs in August after soaring by an upwardly revised 1.053 million jobs in July.

Economists had expected employment to jump by about 750,000 jobs compared to the spike of 943,000 jobs originally reported for the previous month.

Despite the much weaker than expected job growth, the unemployment rate fell to 5.2 percent in August from 5.4 percent in July, matching economist estimates.

“While the Delta variant is driving renewed virus fear, the labor market recovery seems unlikely to go into reverse,” said Lydia Boussour, Lead US Economist at Oxford Economics. “Still, a slower pace of hiring amid a rapidly spreading Delta variant will warrant a patient tapering approach from the Fed.”

She added, “We believe The FOMC will opt to wait until the November meeting to make a formal tapering announcement, and start reducing asset purchases in December or January, depending on employment progress and inflation developments this fall.”

Meanwhile, a separate report released by the Institute for Supply Management showed U.S. service sector growth slowed from a record pace in the month of August.

The ISM said its services PMI fell to 61.7 in August after reaching an all-time high of 64.1 in July, although a reading above 50 still indicates growth in the sector. Economists had expected the index to drop to 61.5.

Most of the major sectors are showing only modest moves on the day, contributing to the lackluster performance by the broader markets.

Gold stocks have shown a significant move to the upside, however, with the NYSE Arca Gold Bugs Index jumping by 2.3 percent.

The rally by gold stocks comes amid an increase by the price of the precious metal, as gold for December delivery is climbing $14.50 to $1,826 an ounce.

Computer hardware and semiconductor stocks are also seeing some strength on the day, contributing to the uptick by the tech-heavy Nasdaq.

On the other hand, housing stocks have come under pressure in morning trading, dragging the Philadelphia Housing Sector Index down by 1.4 percent.

In overseas trading, stock markets across the Asia-Pacific region turned in another mixed performance during trading on Friday. Japan’s Nikkei 225 Index spiked by 2.1 percent, while China’s Shanghai Composite Index fell by 0.4 percent.

Meanwhile, the major European markets have all moved lower over the course of the session. While the French CAC 40 Index has slumped by 1.1 percent, the German DAX Index is down by 0.8 percent and the U.K.’s FTSE 100 Index is down by 0.4 percent.

In the bond market, treasuries have moved to the downside in reaction to the monthly jobs report. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, is up by 3.7 basis points at 1.331 percent.

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