Stocks Climb Off Lows But Continue To See Modest Weakness - U.S. Commentary

(RTTNews) - While selling pressure has remained relatively subdued, stocks are seeing modest weakness in mid-day trading on Friday. A negative reaction to the monthly jobs report is weighing on the markets, although the major averages are hanging on to the bulk of yesterday's strong gains.

The major averages have climbed well off their lows for the session but currently remain in the red. The Dow is down 32.47 points or 0.2 percent at 15,595.55, the Nasdaq is down 2.21 points or 0.1 percent at 3,673.53 and the S&P 500 is down 2.96 points or 0.2 percent at 1,703.91.

The modest weakness on Wall Street comes following the release of a report from the Labor Department showing weaker than expected job growth in the month of July.

The Labor Department said non-farm payroll employment increased by 162,000 jobs in July compared to economist estimates for an increase of about 175,000 jobs.

Despite the weaker than expected job growth, the unemployment rate dipped to 7.4 percent in July, hitting its lowest level since December of 2008.

While the data has generated some negative sentiment, selling pressure is subdued amid uncertainty about the report's impact on the Federal Reserve's plans to scale back is stimulus program.

Commenting on the impact of the report, Sal Guatieri, Senior Economist at BMO Capital Markets, said, "While we still lean toward the Fed announcing a tapering of asset purchases in September, we will need to see a good bounce in August employment and in the economic data to get there."

"Although the unemployment rate has moved lower, the recent economic softness will raise doubts among policymakers about whether this progress can be sustained," he added.

A separate report released by the Commerce Department said personal spending increased by 0.5 percent in June after edging up by 0.2 percent in May. The increase in spending exceeded economist estimates for a 0.4 percent increase.

Additionally, the report said personal income rose by 0.3 percent in June following a 0.4 percent increase in May. Economists had expected income to increase by 0.4 percent.

With spending rising at a faster rate than income, personal saving as a percentage of disposable personal income dropped to 4.4 percent in June from 4.6 percent in May.

The Commerce Department also released a report showing that new orders for manufactured goods rose by less than expected in June.

Sector News

While most of the major sectors are showing only modest moves in mid-day trading, considerable weakness is visible among electronic storage stocks. Reflecting the weakness in the storage sector, the NYSE Arca Disk Drive Index is down by 1.2 percent.

Quantum (QTM) has helped to lead the storage sector lower, falling by 3.1 percent after reporting its fiscal first quarter results.

Trucking stocks have also come under pressure on the day, giving back some ground after ending the previous session sharply higher. The Dow Jones Trucking Index is down by 1.1 percent after jumping 3.8 percent to a record closing high on Thursday.

Notable weakness has also emerged among semiconductor stocks, as reflected by the 1.1 percent loss being posted by the Philadelphia Semiconductor Index.

Meanwhile, housing stocks have shown a strong move to the upside on the day, driving the Philadelphia Housing Sector Index up by 1.3 percent. MDC Holdings (MDC) and Ryland Group (RYL) are turning in two of the housing sector's best performances.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved mostly higher during trading on Friday. Japan's Nikkei 225 Index surged up by 3.3 percent, while Hong Kong's Hang Seng Index ended the day up by 0.5 percent.

Meanwhile, the major European markets turned in a mixed performance on the day. While the French CAC 40 Index inched up by 0.1 percent, the German DAX Index edged down by 0.1 percent and the U.K.'s FTSE 100 Index fell by 0.5 percent.

In the bond market, treasuries have shown a substantial rebound after ending the previous session sharply lower. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, is down by 9.7 basis points at 2.626 percent.