Stocks Give Back Ground But Remain Mostly Positive - U.S. Commentary

(RTTNews) - After moving to the upside early in the session, stocks have given back some ground but remain mostly positive in mid-day trading on Friday. The gains on the day come after the major averages ended the previous session little changed.

Currently, the major averages are holding on to moderate gains. The Dow is up 81.70 points or 0.4 percent at 18,501.00, the Nasdaq is up 22.02 points or 0.4 percent at 5,249.23 and the S&P 500 is up 8.29 points or 0.4 percent at 2,179.15.

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

The Labor Department said non-farm payroll employment climbed by 151,000 jobs in August after surging up by an upwardly revised 275,000 jobs in July.

Economists had expected an increase of about 175,000 jobs compared to the jump of 255,000 jobs originally reported for the previous month.

The report also said the unemployment rate held at 4.9 percent in August, unchanged from the previous month. The unemployment rate had been expected to edge down to 4.8 percent.

While the data is somewhat disappointing, traders reacted positively to suggestions that the report will lead the Federal Reserve to refrain from raising interest rates at its next meeting later this month.

"The report doesn't support the case for a September rate hike," said ING Senior Economist James Knightley. "After all inflation pressures are very benign and the U.S. election has the potential to weigh on sentiment and activity a touch."

He added, "On the other hand, an increasing number of Fed speakers have suggested that they are comfortable to hike rates despite relatively subdued employment growth meaning a December move should not be ruled out."

A separate report from the Commerce Department showed that the U.S. trade deficit narrowed by much more than expected in July amid an increase in the value of exports and a decrease in the value of imports.

The Commerce Department said the trade deficit narrowed to $39.5 billion in July from a revised $44.7 billion in June. Economists had expected the deficit to narrow to $41.3 billion.

Sector News

Energy stocks have shown a strong move to the upside on the day, benefiting from a rebound by the price of crude oil. Crude for October delivery is jumping $1.35 to $44.51 a barrel after tumbling $1.54 to $43.16 a barrel on Thursday.

Reflecting the strength in the energy sector, the NYSE Arca Natural Gas Index has surged up by 2.4 percent, while the Philadelphia Oil Service Index and the NYSE Arca Oil & Gas Index are both up by 1.7 percent.

Significant strength is also visible among gold stocks, as reflected by the 1.8 percent gain being posted by the NYSE Arca Gold Bugs Index. The index is climbing further off the two-month closing low it set on Wednesday.

The strength among gold stocks comes amid an increase by the price of the precious metal, with gold for December delivery climbing $5.90 to $1,323 an ounce.

Tobacco, telecom, and steel stocks are also seeing some strength on the day, although buying interest has waned from earlier in the session.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region turned in yet another mixed performance on Friday. Japan's Nikkei 225 Index closed just below the unchanged line, while China's Shanghai Composite Index inched up by 0.1 percent.

Meanwhile, the major European markets all showed strong moves to the upside on the day. While the German DAX Index jumped by 1.4 percent, the U.K.'s FTSE 100 Index and the French CAC 40 Index surged up by 2.2 percent and 2.3 percent, respectively.

In the bond market, treasuries have moved notably lower following the monthly jobs report. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, is up by 4.3 basis points at 1.613 percent.