Stocks Close Flat as Markets Shrug at Jobs Report
NEW YORK ( TheStreet) -- Major U.S. stock markets closed effectively unchanged Friday following a whipsaw morning session as markets shrugged at the August jobs report.
The S&P 500 and Dow Jones Industrial Average initially spiked in response to the report, a bad-news-is-good-news reaction whereby poor economic indicators translate into a delay of Federal Reserve tapering.
The subsequent sell-off was sparked by the realization that the central bank could still begin tapering before the end of the year and as early as September if it had the view that the overall economic situation still looks constructive.
"Now that all the trade positioning seems to be out of the way, markets are settling," Dave Roda, regional chief investment officer at Wells Fargo Private Bank in Palm Beach, Fla. said over the phone.
"We're still constructive on the economy, we're still constructive on markets, we feel that they're reasonably valued," said Roda. "But there will be an ongoing tug-of-war between the impact that rising rates will have on the economy and of course expectations of Fed tapering."
American Tower Corporation
Non-farm payrolls added a smaller-than-expected 169,000 jobs in August, up from a downwardly revised 104,000 jobs the prior month. Economists, on average, were expecting an addition of 180,000 jobs, according a survey of economists by Thomson Reuters.
The unemployment rate dipped to 7.3% from 7.4% as the labor participation rate fell to the lowest since August 1978, to 63.2% from 63.4%. Economists expected unemployment to remain at 7.4%.
Despite the disappointing nonfarm payrolls number, the average gain in payroll employment in the last three months still amounts to 148,000, which according to Dawn Desjardins, the Toronto-based assistant chief economist at RBC Economics implies that income growth has been sufficient to keep consumers spending although at a relatively modest pace.
The benchmark 10-year Treasury was surging 18/32, diluting the yield to 2.932%.
-- Written by Andrea Tse and Joe Deaux in New York