Stocks End Choppy Day Modestly Lower Despite Upbeat Jobs Data - U.S. Commentary

(RTTNews) - After showing a lack of direction throughout much of the two previous sessions, stocks continued to experience choppy trading on Friday. The lackluster performance came as traders weighed upbeat jobs data against lingering concerns about Ukraine.

The major averages bounced back and forth across the unchanged line before closing modestly lower. The Dow dipped 45.98 points or 0.3 percent to 16,512.89, the Nasdaq edged down 3.55 points or 0.1 percent to 4,123.90 and the S&P 500 slipped 2.54 points or 0.1 percent to 1,881.14.

Despite the losses on the day, the major averages all moved higher for the week. The Dow advanced by 0.9 percent, while the Nasdaq and the S&P 500 jumped by 1.2 percent and 1 percent, respectively.

Before the start of trading, the Labor Department released a report showing stronger than expected job growth and a steep drop in the unemployment rate.

The Labor Department said non-farm payroll employment surged up by 288,000 jobs in April compared to economist estimates for an increase of about 218,000 jobs.

With the stronger than expected job growth, the unemployment rate dropped to 6.3 percent in April from 6.7 percent in March. Economists had expected the unemployment rate to edge down to 6.6 percent.

The drop pulled the unemployment rate down to its lowest level since September of 2008, although the decrease partly reflected a notably smaller labor force.

While the job growth generated some positive sentiment regarding the economy, the drop by the unemployment rate led to renewed worries about the outlook for interest rates.

The Federal Reserve recently dropped language suggesting that it would consider raising interest rates when the unemployment rate dropped below 6.5 percent, but the data still reinforces the notion that easy monetary policy will not last forever.

Concerns about the ongoing crisis in Ukraine also weighed on the markets amid news of clashes between Ukrainian armed forces and pro-Russian militants.

The militants reportedly shot down two helicopters as Ukrainian security forces attempted to retake control of the city of Slavyansk.

Several militants and two civilians were also reportedly killed during the "anti-terrorist" operation, leading Russian President Vladimir Putin to declare that the international agreement reached last month in Geneva had collapsed.

Later in the day, President Barack Obama and German Chancellor Angela Merkel stated that Russia will face further sanctions if its actions disrupt Ukraine's presidential elections scheduled for later this month.

Amid the worries about an escalation of the conflict over the weekend, traders seemed reluctant to push the Dow and the S&P 500 to new record highs.

Sector News

After trending higher over the past several weeks, utilities stocks saw substantial weakness on the day. The Dow Jones Utilities Average fell by 2.1 percent, pulling back well off the record closing high set in the previous session.

Public Service (PEG) helped to lead the utilities sector lower after RBC Capital Markets downgraded its rating on the company's stock to Sector Perform from Outperform and said the sector is too expensive.

Significant weakness was also visible among biotechnology stocks, as reflected by the 1.5 percent loss posted by the NYSE Arca Biotechnology Index. Pharmacyclics (PCYC) posted a steep loss after reporting its quarterly results.

Meanwhile, gold stocks showed a strong move to the upside on the day, driving the NYSE Arca Gold Bugs Index up by 1.9 percent. The strength among gold stocks came as gold for June delivery jumped $19.50 to $1,302.90 an ounce.

After moving higher in early trading, housing stocks also managed to hold on to notable gains. The Philadelphia Housing Sector Index climbed 1.2 percent to its best closing level in a month.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region turned in a mixed performance during trading on Friday. Japan's Nikkei 225 Index dipped by 0.2 percent, while Hong Kong's Hang Seng Index advanced by 0.6 percent.

The major European markets also ended the day on opposite sides of the unchanged line. While the U.K.'s FTSE 100 Index crept up 0.2 percent, the French CAC 40 Index and the German DAX Index fell by 0.7 percent and 0.5 percent, respectively.

In the bond market, treasuries showed a substantial recovery after coming under pressure in early trading and managed to close modestly higher. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, edged down by 1.5 basis points to 2.591 percent.

Looking Ahead

While traders are likely to keep a close eye on developments in Ukraine, next week's trading could also be impacted by the release of reports on service sector activity, international trade, and labor productivity as well as two days of Congressional testimony from Fed Chair Janet Yellen.

On the earnings front, Pfizer (PFE), Office Depot (ODP), Activision Blizzard (ATVI), Electronic Arts (EA), Whole Foods (WFM), Anheuser-Busch InBev (BUD), Prudential (PRU), Wendy's (WEN), and News Corp (NWSA) are among the companies due to report their quarterly results next week.