For the third consecutive day, stocks have shown a notable move to the downside over the course of morning trading on Friday after failing to sustain an initial upward move. The major averages have all pulled back well off their highs for the session.
The initial strength in the markets came as traders reacted to the release of a Labor Department report showing a much smaller than expected decrease in employment in the month of April.
The report showed that non-farm payroll employment fell by 539,000 jobs in April following a revised decrease of 699,000 jobs in March. The decrease in employment marked the smallest drop in jobs since October of 2008.
Economists had expected a decrease of about 600,000 jobs compared to the decrease of 663,000 originally reported for the previous month.
While employment fell by less than expected, upward revisions to number of job losses in February and March offset some of the optimism about the labor market.
In other economic news, the Commerce Department said wholesale inventories fell 1.6 percent in March following a revised 1.7 percent decrease in February. The drop in inventories exceeded economist estimates of a 1.0 percent decrease.
Traders also continue to digest the official results of the government's stress tests of the nation's 19 largest financial institutions, which were released after the close of trading on Thursday.
U.S. bank regulators said about half of the country's biggest financial institutions need to improve their capital positions in order to ensure that they can weather a further downturn in the economy.
The results of the stress tests showed that 10 of the 19 banks tested need to raise a total of $74.6 billion. The banks involved in the exercise account for two-thirds of the assets and more than half of the loans in the U.S. banking system.
In other news, Dow component McDonald's (MCD) is currently up 2.3 percent after the fast food giant said its global comparable sales rose 6.9 percent in April. The company also said systemwide sales fell 1.0 percent due largely to the stronger dollar.
The major averages have continued to move lower in the past few minutes, with the tech-heavy Nasdaq sliding into negative territory. While the Nasdaq is currently down 3.30 at 1,712.94, the Dow remains up 44.61 at 8,454.46 and the S&P 500 is up 6.06 at 913.45.
Despite the pullback by the broader markets, bank stocks are holding onto strong gains, as traders react positively to the release of the official results of the government's stress tests. The Kbw Bank Index is currently up 5.1 percent, poised to set a four-month closing high.
Fifth Third Bancorp (FITB) is posting a particularly strong gain, with the regional bank currently up 41.7 percent after reaching its best intraday level in almost four months. The stock has benefited from an upgrade by Morgan Keegan, which raised its rating to Outperform.
Significant strength also remains visible in the health insurance sector, as reflected by the 3.8 percent gain currently being shown by the Morgan Stanley Healthcare Payor Index. A strong gain by Cigna (CI) has helped to lift the index to a seven-month intraday high.
Energy stocks have also shown strong upward moves, benefiting from a notable increase by the price of oil. Crude for June delivery is currently up $0.97 at $57.68 a barrel after reaching a six-month intraday high on Thursday.
On the other hand, considerable weakness has emerged in the semiconductor sector. The Philadelphia Semiconductor Index is currently down 3.6 percent, pulling back further off its recent highs.
Computer hardware and airline stocks have also come under pressure over the course of the morning, with the sharp rise by the price of oil contributing to the weakness in the airline sector.
Stocks Driven By Analyst Comments
Extending a recent upward move, shares of Target (TGT) are turning in a strong performance in morning trading on Friday, with the discount retailer currently up 2 percent. At its high for the session, Target was at a seven-month intraday high.
The gain by Target comes after Credit Suisse upgraded its rating on the company's stock to Outperform from Neutral. Credit Suisse noted that Target's customer traffic increased in April without any major change in prices and what the company offers.
Shares of Career Education (CECO) are also seeing considerable strength after UBS upgraded its rating on the educational services provider to Buy from Neutral. Career Education is currently up 3.8 percent after ending the previous session at a three-month closing low.
On the other hand, shares of Intercontinental Hotels (IHG) are currently down 4.2 percent after Deutsche Bank downgraded its rating on the hotel company to Sell from Hold. Deutsche Bank said it believes the stock's recent rally has been overdone.
In overseas trading, stock markets across the Asia-Pacific region closed mostly higher, reacting positively the U.S. stress test results. Japan's benchmark Nikkei 225 Index closed up 0.5 percent, at a six-month closing high.
The major European markets are seeing considerable strength, with the U.K.'s FTSE 100 Index advancing 1.3 percent, while the French CAC 40 Index and the German DAX Index are up 1.6 percent and 2.5 percent, respectively.
In the bond market, treasuries have seen some volatility over the course of the morning, with the benchmark ten-year note bouncing back and forth across the unchanged line. The yield on the ten-year note is currently down less than a basis point at 3.289 percent.
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