RTTNews - After posting strong gains in the previous session, stocks finished Friday's trading mostly lower after a lackluster performance. The major averages ended the day on opposite sides of the unchanged line, as traders were cautious following an employment report indicative of some signs of life in the labor market.

The report from Labor Department showed that non-farm payroll employment fell by 345,000 jobs in May following a revised decrease of 504,000 jobs in April. Economists had expected a decrease of about 520,000 jobs compared to the loss of 539,000 jobs originally reported for the previous month.

At the same time, the report said that the unemployment rate jumped to 9.4 percent in May from 8.9 percent in April. With the increase, the unemployment rate came in above economist estimates of 9.2 percent and rose to its highest level since August of 1983.

In an interview with RTT News, Hugh Johnson, chief investment officer for Johnson Illington Advisors called the better than expected May payrolls reading extremely positive news.

Yes, we're still in a recession, we're still losing jobs.. things are still not great, but they're not as bad as they were, Johnson said. Everything is pointing towards a recovery in the economy.

Johnson also said the market's rather muted response to the employment report was due in part to a little bit of caution creeping into the market.

On the corporate front, shares of Anglo-Australian mining giant Rio Tinto (RTP) rose after the company entered into a joint venture agreement with rival BHP Billiton and scrapped its $19.5 billion deal with Chinalco.

In lieu of its deal with Chinalco, Rio Tinto instead launched a heavily discounted $15.2 billion rights issue. The company also reported a decline in fiscal 2009 first-quarter earnings, adversely impacted by price movements and production volumes amid the downturn in economy.

Meanwhile, international retailer Guess (GES) said its first quarter profit fell 32 percent from last year, as revenue dropped and margins shrank. However, the company's quarterly earnings per share beat analysts' expectations. The firm's shares closed up by 5.8 percent for the day.

The major averages eventually finished the day mixed after being marred by choppy trading throughout the session. While the Dow finished up by 12.89 points of 0.2 percent at 8,763.13, the Nasdaq slipped by 0.60 points or less than a tenth of a percent to 1,849.42 and the S&P 500 edged down by 2.37 points or 0.3 percent to 940.09.

For the week, the major averages all enjoyed notable gains despite being slowed by lackluster sessions on Wednesday and Friday. The Dow moved up by 3.1 percent for the week, while the Nasdaq rose by 4.2 percent and the S&P 500 climbed by 2.3 percent.

Sector News

Despite the uninspiring performance by the broader markets, defense stocks posted strong gains, as reflected by the 2.2 percent advance by the Philadelphia Defense Sector Index. The day's gains put the index at its best closing high in nearly five months.

Buoying the sector on the day were shares of Esterline Technologies (ESL), which rose by 5.6 percent on the day. With the climb, the stock closed at its best level in over three months.

Steel stocks also closed notably higher, with the Amex Steel Index up by 2 percent, offsetting some of Wednesday's steep losses.

On the other hand, gold stocks saw considerable weakness. The Amex Gold Bugs Index fell by 5.0 percent, prompted by a considerable retreat in the price of gold futures, which dropped over $20 an ounce.

Significant weakness was also visible among banking, semiconductor, housing, and commercial real estate stocks. The losses shown by semiconductor stocks came after the Semiconductor Industry Association forecast a 29 percent decline in semiconductor sales for the year.

Dow Components

While the majority of the Dow components finished in negative territory, strong gains by some of the blue chip stocks contributed to the modest gain posted by the index.

Shares of United Technologies (UTX) helped to bolster the Dow, rising by 2.3 percent on the day. With the climb, the stock finished the session at its best closing level in seven months.

Hewlett Packard (HPQ) also turned in one of the Dow's best performances, rising by 3.5 percent on the day. With the advance, the stock closed at its highest price in well over four months. Boeing (BA), Alcoa (AA) and 3M (MMM) also posted notable gains.

On the other hand, the Dow was limited by shares of DuPont (DD), which slipped by 6.0 percent, testing a monthly low. The move came after the stock was downgraded to Underperform from Neutral by Bank of America.

Merck (MRK) also fell, closing lower by 1.9 percent, backing off of the five-month high reached in the previous session. Citigroup (C) and JP Morgan Chase (JPM) also showed notable moves to the downside on the day, dropping by 2.8 percent and 2.3 percent, respectively.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region finished notably higher on Friday. Japan's benchmark Nikkei 225 Index rose by 1.0 percent, while Hong Kong's Hang Seng closed up by 1.0 percent.

The major European markets also ended the day higher. The U.K.'s FTSE 100 Index finished up by 1.2 percent, while the French CAC 40 Index and the German DAX Index closed up by 0.8 percent and 0.2 percent, respectively.

In the bond market, treasuries fell considerably for the second straight day. Subsequently, the yield on the benchmark ten-year note closed at 3.862 percent, a climb of 14.6 basis points on the day.

Looking Ahead

Looking ahead to next week, traders will be looking to the results of a Treasury Department auction of the benchmark ten-year note in order to gauge the status of the bond market.

Economic data on tap includes the Federal Reserve's Beige Book, which indicates the economic climate of the 12 fed districts, and the U.S. Department of Commerce report on retail sales for May.

The sales data will be closely watched as investors are looking to see if the recent spike in consumer confidence has translated into consumer spending, which makes up two-thirds of U.S. economic activity.

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