Dow Climbs Well Off Worst Levels But Nasdaq Continues To Post Steep Loss

After moving sharply lower early in the session, stocks continue to see notable weakness in afternoon trading on Friday. The Dow has climbed well off its worst levels of the day, while the Nasdaq and the S&P 500 remain firmly negative.

Currently, the Nasdaq is down 315.59 points or 2.1 percent at 15,065.73 and the S&P 500 is down 43.94 points or 1 percent at 4,533.16. The Dow is also down 80.01 points or 0.2 percent at 34,559.78 but has rebounded strongly after falling more than 275 points.

The pullback following the rally seen on Thursday extends the volatility seen throughout the week, with stocks showing wild swings back and forth in reaction to the latest news about the Omicron variant of the coronavirus.

After the first confirmed omicron case in the U.S. earlier in the week, the new variant has now been detected in at least five states.

Traders are also reacting to a closely watched report from the Labor Department showing much weaker than expected U.S. job growth in the month of November.

The report said non-farm payroll employment rose by 210,000 jobs in November after surging by an upwardly revised 546,000 jobs in October.

Economists had expected employment to spike by 550,000 jobs compared to the jump of 531,000 jobs originally reported for the previous month.

Despite the much weaker than expected job growth, the unemployment rate slid to 4.2 percent in November from 4.6 percent in October. Economists had expected the unemployment rate to edge down to 4.5 percent.

With the much bigger than expected decrease, the unemployment rate fell to its lowest level since hitting 3.5 percent in February of 2020.

While the disappointing job growth has raised some concerns about the economic outlook amid the emergence of the Omicron variant, economists do not expect the data to dissuade from the Federal Reserve from accelerating the tapering of its asset purchases.

“‘Yes’ the jobs report is strong enough for the Fed to announce a likely doubling of the pace of QE asset purchase tapering,” said Gregory Daco, Chief U.S. Economist at Oxford Economics.

He added, “The Fed’s pivot is aimed at providing hawkish forward guidance while clearing the runway for rate hikes anytime after March 2022.”

Meanwhile, a separate report from the Institute for Supply Management showed an unexpected acceleration in the pace of growth in U.S. service sector activity in the month of November.

The ISM said its services PMI rose to a record high 69.1 in November from 66.7 in October, with a reading above 50 indicating growth in the sector. The increase surprised economists, who had expected the index to dip to 65.0.

Sector News

Software stocks continue to see substantial weakness in afternoon trading, with the Dow Jones U.S. Software Index plunging by 3.2 percent to its lowest intraday level in well over a month.

DocuSign (DOCU) is posting a steep loss after the e-signature company reported fiscal third quarter results that beat expectations but provided disappointing revenue guidance.

Considerable weakness also remains visible among banking stocks, resulting in a 1.9 percent slump by the KBW Bank Index.

Biotechnology stocks also continue to see significant weakness on the day, as reflected by the 1.6 percent drop by the NYSE Arca Biotechnology Index.

Tobacco, brokerage and airline stocks have also moved to the downside on the day, while gold stocks are seeing some strength amid an increase by the price of the precious metal.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved mostly higher during trading on Friday. Japan’s Nikkei 225 Index jumped by 1 percent, while China’s Shanghai Composite Index advanced by 0.9 percent.

Meanwhile, the major European markets moved to the downside over the course of the session. While the U.K.’s FTSE 100 Index edged down by 0.1 percent, the French CAC 40 Index and the German DAX Index fell by 0.4 percent and 0.6 percent, respectively.

In the bond market, treasuries have moved notably higher after seeing some early volatility. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, is down by 7.3 basis points at 1.375 percent.

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