Stocks Remain Under Pressure After Seeing Early Weakness - U.S. Commentary

(RTTNews) - After coming under pressure in early trading on Friday, stocks have seen some further downside over the course of the session. The tech-heavy Nasdaq has shown a particularly steep drop and is on pace to end the day at its lowest closing level in well over a year.

Currently, the major averages are off their worst levels of the day but still firmly in the red. The Dow is down 175.69 points or 1.1 percent at 16,240.89, the Nasdaq is down 106.29 points or 1.4 percent at 4,403.27 and the S&P 500 is down 27.86 points or 1.5 percent at 1,887.59.

The sell-off on Wall Street comes following the release of a Labor Department showing disappointing job growth in January but also a drop in the unemployment rate to a nearly eight-year low.

The Labor Department said non-farm payroll employment climbed by 151,000 jobs in January compared to economist estimates for an increase of about 188,000 jobs.

While the report also said the jump in employment in December was downwardly revised to 262,000 jobs from 292,000 jobs, the increase in employment in November was upwardly revised to 280,000 jobs from 252,000 jobs.

With the combined revisions, job growth in November and December was only 2,000 jobs lower than previously reported.

The Labor Department also said the unemployment rate edged down to 4.9 percent in January from 5.0 percent in December, while economists had expected the rate to come in unchanged.

The unexpected decrease pulled the unemployment rate down to its lowest level since a matching rate in February of 2008.

Analysts have also highlighted a 0.5 percent increase in average hourly earnings, which has led to some concerns about the outlook for interest rates.

Chris Low, chief economist at FTN Financial, said, "Fed officials have been anticipating slower payroll growth for months, so this slowdown is more likely to draw a sigh of relief from FOMC members than concern about potential collapse into weakness."

"Meanwhile, strong earnings growth and jobs strength in unexpected places like retail and manufacturing have the market on alert, too," he added.

A separate report from the Commerce Department showed that the U.S. trade deficit widened more than expected in December amid an increase in imports and a decrease in exports.

Sector News

Internet stocks have shown a particularly steep drop over the course of the session, dragging the Dow Jones Internet Index down by 6 percent. With the loss, the index has fallen to its lowest intraday level in a year.

RealNetworks (RNWK), Expedia (EXPE), Netflix (NFLX), and Amazon (AMZN) are turning in some of the internet sector's worst performances.

Substantial weakness is also visible among software stocks, as reflected by the 4.1 percent loss being posted by the Dow Jones Software Index. Adobe Systems (ADBE) has helped to lead the sector lower, slumping by 6.4 percent.

Biotechnology, semiconductor, housing, and networking stocks are also seeing considerable weakness, moving lower along with most of the other major sectors.

On the other hand, gold stocks are among the few groups bucking the downtrend, resulting in a 1.9 percent jump by the NYSE Arca Gold Bugs Index. The strength in the sector comes despite a modest decrease by the price of gold.

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 slumped by 1.3 percent, while Hong Kong's Hang Seng Index advanced by 0.6 percent.

Meanwhile, the major European markets all moved to the downside on the day. While the German DAX Index tumbled by 1.1 percent, the U.K.'s FTSE 100 Index and the French CAC 40 Index fell by 0.9 percent and 0.7 percent, respectively.

In the bond market, treasuries have climbed back near the unchanged line. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, is up by less than a basis point at 1.868 percent after reaching a high of 1.896 percent.