U.S. Stocks Regain Ground After Initial Move To The Downside

Stocks came under pressure early in the session on Friday but have regained ground over the course of the morning. The major averages have bounced well off their lows of the session, with the Dow climbing into positive territory.

Currently, the major averages are turning in a mixed performance. While the Dow is up 19.44 points or 0.1 percent at 34,073.38, the Nasdaq is down 28.10 points or 0.2 percent at 12,172.72 and the S&P 500 is down 10.30 points or 0.3 percent at 4,169.46.

The initial pullback on Wall Street partly reflected renewed concerns about the outlook for interest rates following the release of much stronger than expected jobs data.

The Labor Department’s closely watched monthly jobs report said non-farm payroll employment soared by 517,000 jobs in January after surging by an upwardly revised 260,000 jobs in December.

Economists had expected employment to increase by 185,000 jobs compared to the addition of 223,000 jobs originally reported for the previous month.

The report also said the unemployment rate edged down to 3.4 percent in January from 3.5 percent in December. The dip surprised economists, who had expected the unemployment rate to inch up to 3.6 percent.

With the unexpected decrease, the unemployment rate dropped to its lowest level since hitting a matching rate in May 1969.

While the report points to continued strength in the labor market, the data led to concerns the Federal Reserve will raise interest rates higher than currently anticipated.

A negative reaction to earnings news from tech giants Google parent Alphabet (GOOGL), Amazon (AMZN) and Apple (AAPL) also weighed on the markets.

Selling pressure waned shortly after the start of trading, however, with upbeat service sector data generating optimism the economy could be headed for a soft landing.

The report from the Institute for Supply Management showed service sector activity rebounded by much more than expected in the month of January.

The ISM said its services PMI jumped to 55.2 in January from a revised 49.2 in December, with a reading above 50 indicating growth. Economists had expected the index to inch up to 50.4 from the 49.6 originally reported for the previous month.

Despite the recovery by the broader markets, interest rate sensitive utilities stocks continue to see substantial weakness, dragging the Dow Jones Utility Average down by 3.3 percent.

Substantial weakness also remains visible among gold stocks, with the NYSE Arca Gold Bugs Index tumbling by 2.9 percent.

The sell-off by gold stocks comes as the price of gold for April delivery is plunging $44.20 or 2.3 percent to $1,886.60 an ounce.

Airline stocks are also seeing significant weakness after yesterday’s rally, dragging the NYSE Arca Airline Index down by 2.6 percent. The index is pulling back off its best closing level in almost eight months.

Meanwhile, oil service stocks are showing a significant rebound after falling sharply in the previous session, driving the Philadelphia Oil Service Index up by 3.1 percent.

The rebound by oil service stocks comes amid a sharp increase by the price of crude oil, with crude for March delivery jumping $1.37 to $77.25 a barrel.

In overseas trading, stock markets across the Asia-Pacific region turned in a mixed performance during trading on Friday. Japan’s Nikkei 225 Index rose by 0.4 percent, while China’s Shanghai Composite Index fell by 0.7 percent.

The major European markets have also turned mixed on the day. While the German DAX Index is down by 0.2 percent, the French CAC 40 Index is up by 0.7 percent and the U.K.’s FTSE 100 Index is up by 1.1 percent.

In the bond market, treasuries have moved sharply lower in reaction to the monthly jobs data. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, is up by 13.6 basis points at 3.532 percent.

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