Major Averages Turn Negative After Seeing Initial Strength – U.S. Commentary

After initially moving to the upside, stocks have come under pressure over the course of morning trading on Friday. The major averages have pulled back well off their highs of the session and into negative territory.

Currently, the major averages are all in the red, although the tech-heavy Nasdaq is underperforming its counterparts. While the Nasdaq is down 85.34 points or 1.2 percent at 7,348.72, the Dow is down 63.73 points or 0.3 percent at 25,317.01 and the S&P 500 is down 15.11 points or 0.6 percent at 2,725.26.

The downturn on Wall Street is partly due to a sharp drop by shares of Apple (AAPL), with the tech giant plunging by 6.5 percent on the day.

The steep drop by Apple comes after the iPhone and iPad maker reported fiscal fourth quarter results that exceeded estimates but forecast weaker than expected revenues for the current quarter.

Early in the session, buying interest was generated in reaction to a report from the Labor Department showing stronger than expected job growth in the month of October.

The Labor Department said non-farm payroll employment surged up by 250,000 jobs in October after rising by a downwardly revised 118,000 jobs in September.

Economists had expected an increase of about 190,000 jobs compared to the addition of 134,000 jobs originally reported for the previous month.

Meanwhile, the report said the unemployment rate in October was unchanged from the previous month at 3.7 percent, its lowest level since hitting 3.5 percent in December of 1969.

Average hourly employee earnings rose by $0.05 to $27.30 in October, reflecting a 3.1 percent increase compared to the same month a year ago.

The annual rate of hourly earnings growth accelerated from 2.8 percent in September, reaching the fastest pace since April of 2009.

“The U.S. jobs market remains incredibly strong and with wages starting to accelerate, domestic price pressures will increase,” said ING Chief International Economist James Knightley.

He added, “This will keep the Federal Reserve on its path of ‘gradual’ interest rate hikes with next week’s FOMC meeting set to signal a December move.”

Traders also reacted positively to a report from Bloomberg indicating President Donald Trump has asked key U.S. officials to begin drafting potential terms of a trade deal with China.

People familiar with the matter told Bloomberg the push for a possible trade deal was prompted by Trump’s phone call with Chinese President Xi Jinping on Thursday.

In a post on Twitter, Trump said he had a “very good” conversation with Xi on trade, adding that the “discussions are moving along nicely.”

The people told Bloomberg that Trump asked key cabinet secretaries to have their staff draw up a potential deal to signal a ceasefire in an escalating trade conflict.

Trump and Xi are expected to meet on the sidelines of a Group of 20 summit in Buenos Aires, Argentina, beginning November 30th.

Semiconductor stocks have shown a significant move to the downside on the day, giving back ground after moving notably higher over the past few sessions.

Reflecting the pullback by semiconductor stocks, the Philadelphia Semiconductor Index is slumping by 1.7 percent.

Natural gas and commercial real estate stocks have also moved notably lower, while considerable strength remains visible among telecom stocks.

In overseas trading, stock markets across the Asia-Pacific region moved sharply higher during trading on Friday. Japan’s Nikkei 225 Index shot up by 2.6 percent, while Hong Kong’s Hang Seng Index spiked by 4.2 percent.

The major European markets have also moved to the upside on the day. While the U.K.’s FTSE 100 Index is up by 0.4 percent, the French CAC 40 Index is up by 0.9 percent and the German DAX Index is up by 1.1 percent.

In the bond market, treasuries are pulling back following the upbeat employment data. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, is up by 2.8 basis points at 3.172 percent.

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