by Investing.com Staff, Investing.com
U.S. stocks fell sharply on Friday as an inconclusive August jobs report provided investors with two more weeks of uncertainty before the Federal Reserve decides whether it will raise short-term interest rates later this month.
The possibility of an imminent rate hike pushed stocks lower, as the major indices erased most of the gains from its previous two sessions. The Dow Jones Industrial Average fell 272.38 or 1.66% to 16,102.38, ending the week lower while the NASDAQ Composite indexlost 49.58 or 1.05%, closing lower for the fourth time in five sessions. All three major indices remained in negative territory for the year.
The S&P 500 Composite index, meanwhile, dipped 29.91 or 1.53% to 1,921.22, as all 10 sectors closed in the red. Stocks in the Basic Materials, Financials and Energy industries lagged, each closing by at least 1.75% on the session.
A strong jobs figure in Friday's report from the U.S. Bureau of Labor Statistics may have convinced the Federal Open Market Committee that conditions were ripe for its first interest rate hike since 2006. But U.S. non-farm payrolls for August only ticked up by 173,000, far below consensus estimates of a 223,000 gain. Still, a September rate hike likely remains on the table after the U.S. employment rate fell to 5.1%, its lowest level since April, 2008.
The top performer on the Dow was Boeing Company (NYSE:BA), which lost 0.74 or 0.56% to close at 130.28. All 30 components on the Dow closed in the red. Shares in Boeing (NYSE:BA) are relatively flat for the year. The worst performer on the Dow was EI du Pont de Nemours and Company (NYSE:DD), which fell 1.56 or 3.09% to 49.00.
The biggest gainer on the NASDAQ was Dollar Tree Inc (NASDAQ:DLTR), which added 1.35 or 2.01% to 68.35. Dollar Tree (NASDAQ:DLTR) finished just ahead of Mylan (NASDAQ:MYL), which rose 0.85 or 1.79% to 48.27, as the Generics giant continued its hostile takeover bid of Dublin-based pharmaceutical company Perrigo. The worst performer was TripAdvisor Inc (NASDAQ:TRIP), which fell 2.15 or 3.09% to 67.32.
The top performer on the S&P 500 was Noble Energy Inc (NYSE:NBL), which gained 0.69 or 2.28% to 31.12. The worst performer was CONSOL Energy Inc (NYSE:CNX), which fell 0.78 or 5.45% to 13.46. Shares in Diamond Offshore Drilling Inc (NYSE:DO) and Freeport-McMoran Copper & Gold Inc (NYSE:FCX) each fell more than 3%, amid sharp declines in U.S. manufacturing and mining positions last month.
On the New York Stock Exchange, declining issues outnumbered advancing ones by a 2,364 to 757 margin.
Additional stock news from Reuters at Investing.com.
EUR/USD rebounded from a major sell-off one session earlier amid declining Treasury yields, as a mixed U.S. jobs report provided little clarity as to whether the Federal Reserve could raise interest rates later this month.
The currency pair traded in a range between 1.1091 and 1.1188 before settling at 1.1151, up 0.0028 or 0.25% on Friday's session. For the week, the euro fell by approximately 0.5% against the dollar after suffering sharp declines in each of the previous two sessions. Despite fluctuating between 1.08 and 1.18 over the last four months, EUR/USD is virtually flat in comparison with its level in early-May.
EUR/USD likely gained support at 1.0959, the low from August 11 and was met with resistance at 1.1625, the high from Aug. 25.
On Friday morning the U.S. Department of Labor's Bureau of Labor Statistics (BLS) said nonfarm payrolls for the month of August increased by 173,000, below estimates of a 223,000 gain. The figure received a boost from a 56,000 gain in Health Care and social assistance jobs, including an increase of 16,000 in hospital positions. For the month, employment in financial activities rose by 19,000 and has expanded by 170,000 over the last year. Following upward revisions of 44,000 for June and July, monthly job gains have averaged 221,000 over the last three months.
Many economists regard the August jobs report as a tricky one to analyze due to the high percentage of Americans who are away on vacation throughout the month.
The unemployment rate in August fell 0.2% to 5.1%, its lowest level since April, 2008. The rate was expected to fall by 0.1% to 5.2% according to consensus estimates after remaining unchanged in July.
The U-6 unemployment rate, a broader gauge of the national employment situation, inched down 0.1% to 10.3% on the month. The reading measures the total level of unemployed workers plus those marginally attached to the labor force, as well as those who are no longer looking for a job but have looked for one over the last 12 months. In addition, 1.8 million were classified as being marginally attached to the labor force, down from 2.1 million 12 months earlier. Last August, the U-6 rate stood at 12.0%, after falling by 0.6% from the previous month.
By comparison, the U-6 rate peaked above 17% during the height of the financial crisis. It is also a preferred measure of Fed chair Janet Yellen, as she weighs whether the labor market has improved enough to warrant an imminent rate hike.
Currency traders continued to digest a dovish policy meeting from the European Central Bank's Governing Council on Thursday when ECB head Mario Draghi provided strong indications that the central bank will use all tools necessary to boost inflation throughout the zone. Draghi hinted the ECB could extend its €60 billion a month Quantitative Easing program in an effort to bolster long-term GDP and inflation. The ECB also left its benchmark interest rate unchanged at 0.5%.
Investors piled into U.S. Treasury bonds on Friday, following the release of the mixed jobs report. Yields on U.S. 10-Year Treasuries fell more than four basis points to 2.109%, its lowest level in more than a week, before closing at 2.131%.
Speculators this week were less bearish on JPY, AUD, CAD and more bearish on the S&P 500.
Gold fell mildly on Friday amid a relatively flat dollar, as a mixed U.S. jobs report for the month of August provided few signals on the likelihood of a September rate hike by the Federal Reserve.
On the Comex division of the New York Mercantile Exchange, gold for December delivery traded between $1,116.30 and $1,1232.20 an ounce before settling at 1,120.00, down 4.50 or 0.40% on the session. Gold lost approximately 1% in value on the week, after the moderate gains from Tuesday's session were erased during its current three-session losing streak. The precious metal has now closed lower in nine of its last 11 sessions.
Gold likely gained support at $1,094 an ounce, the low from August 11 and was met with resistance at $1,155.50, the high on Aug. 25.
On Friday morning the U.S. Department of Labor's Bureau of Labor Statistics (BLS) said nonfarm payrolls for the month of August increased by 173,000, below estimates of a 223,000 gain.
Last August, the U-6 rate stood at 12.0%, after falling by 0.6% from the previous month. By comparison, the U-6 rate peaked above 17% during the height of the financial crisis. It is also a preferred measure of Fed chair Janet Yellen, as she weighs whether the labor market has improved enough to warrant an imminent rate hike.
Gold, which is not attached to interest rates or dividends, struggles to compete with high-yield bearing assets in periods of rising rates.
The U.S. Dollar Index, which measures the strength of the greenback versus a basket of six other major currencies, rose modestly to an intraday high of 96.59 before falling back to 96.25 in afternoon trading. With several hours left in Friday's session, the index was on pace to gain approximately 0.4% on the week. Dollar-denominated commodities such as gold become more expensive for foreign purchasers when the dollar appreciates.
Silver for December delivery fell 0.127 or 0.86% to 14.58 an ounce.
Copper for December delivery plunged 0.071 or 2.99% to 2.313 a pound.
Crude futures inched down on Friday amid a relatively flat dollar, as U.S. oil rigs fell for the first time in six weeks, marking its largest weekly decline since the start of the summer.
On the New York Mercantile Exchange, WTI crude for October delivery traded between $45.80 and $47.20 a barrel before settling at $46.03, down 0.73 or 1.48% on the session. Texas Long Sweet futures halted a two-day winning streak. Still, U.S. crude futures closed the week up more than 4% on the back of massive gains on Monday when WTI crude surged by more than $4 a barrel.
On the Intercontinental Exchange (ICE), brent crude for October delivery wavered between $49.69 and $51.03 a barrel before closing at $49.61, down 1.09 or 2.16% on the day. North Sea brent crude futures ended the week up nearly 2%. Meanwhile, the spread between the international and U.S. domestic benchmarks of crude stood at $3.58, below Thursday's level of $3.98 at the close.
On Friday afternoon, oil services firm Baker Hughes (NYSE:BHI) said in its weekly rig count that U.S. oil rigs for the week ending on Aug. 28 fell by 13 to 662. It marked the first week that the weekly rig count climbed higher since mid-July. A week earlier, U.S. oil rigs rose by one to 675, marking the eighth increase in the weekly rig count over the last nine weeks.
The weekly draw had little impact on crude futures, as prices only rose moderately after the release of the report. Energy traders may have expected a sharper reduction as demand continues to wane toward the end of the summer driving season. Gasoline demand typically falls considerably after Labor Day Weekend.
Elsewhere, top advisors of Russia president Vladimir Putin provided strong signals on Friday that they expect global crude prices to remain near its current level over the next year. Speaking to reporters in Vladivostok, Andrey Belousov, Putin's top economic aide, said the 2016 budget will be based on oil at $50 a barrel due to the difficulty of predicting the direction of global crude prices. Separately, Russia deputy prime minister Arkady Dvorkovich said at forum in Italy that Russia is comfortable with oil at $60 a barrel.
It came one day after Putin and Venezuela president Nicolas Maduro agreed to work collaboratively in an effort to stabilize oil prices throughout the world. Crashing oil prices have hammered the economies of the two export-reliant nations over the last year.
The U.S. Dollar Index, which measures the strength of the greenback versus a basket of six other major currencies, rose modestly to an intraday high of 96.59 before falling back to 96.20 in afternoon trading. With several hours left in Friday's session, the index was on pace to gain approximately 0.4% on the week.
A mixed U.S. jobs report for the month of August on Friday provided few hints on whether the Federal Reserve will lift short-term interest rates later this month. Last month, the U.S. non-farm payrolls ticked up by 173,000 while the unemployment rate fell by 0.2% to 5.1%, its lowest level since April, 2008. Economists, however, expected an increase of 223,000 non-farm payrolls on the month.
Dollar-denominated commodities such as crude become more expensive for foreign purchasers when the dollar appreciates.
Natural Gas (Thursday Report)
Natural gas futures trimmed gains on Thursday, after data showed that U.S. natural gas supplies rose more than expected last week.
Natural gas for delivery in October on the New York Mercantile Exchange inched up 1.8 cents, or 0.7%, to trade at $2.667 per million British thermal units during U.S. morning hours. Prices were at around $2.673 prior to the release of the supply data.
The U.S. Energy Information Administration said in its weekly report that natural gas storage in the U.S. in the week ended August 28 rose by 94 billion cubic feet, above expectations for an increase of 88 billion.
That compared with builds of 69 billion cubic feet in the prior week, 79 billion cubic feet in the same week last year, while the five-year average change for the week was an increase of 60 billion cubic feet.
Total U.S. natural gas storage stood at 3.193 trillion cubic feet as of last week. Stocks were 495 billion cubic feet higher than last year at this time and 122 billion cubic feet above the five-year average of 3.071 trillion cubic feet for this time of year.
A day earlier, natural gas prices lost 5.4 cents, or 2.0%, as market players weighed shifting weather forecasts to assess the outlook for U.S. demand and supply levels.
Updated weather forecasting models showed that cooler weather was expected across most parts of the Great Lakes, Northeast and Midwest-regions in the coming days, dampening demand for the fuel.
Demand for natural gas tends to fluctuate in the summer based on hot weather and air conditioning use. Natural gas accounts for about a quarter of U.S. electricity generation.