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Before the markets opened, the Labor Department released its highly anticipated monthly report on the employment situation, showing that employment continued to decrease in the month of August. The continued job losses helped to lift the unemployment rate to 6.1 percent, its highest level since September 2003.
Chris Low, Chief Economist at FTN Financial Group said that the job loss reported this morning was twice as bad as expected when taking into account the revisions for the previous months.
"Add the jump in the unemployment rate, which is now just two-tenths lower than the peak in the last recession, and a jobs recession at least is undeniable," Low added.
Meanwhile, in an interview with RTT News, Mike Englund, chief economist of Action Economics discussed the "odd dichotomy" of the employment situation. He said that the "pretty nasty" unemployment figure takes a near term interest rate hike "off the table," but it shouldn't drive consumer confidence down "all that much."
In addition, Englund predicted that the labor market should "tighten up" going forward, but he said the growth outlook is going to slow in the fourth quarter.
In other news, video-game publisher Take-Two Interactive Software (TTWO | Quote | Chart | News | PowerRating) said Thursday after the markets closed that it swung to profit in the third quarter, helped by strong sales of blockbuster "Grand Theft Auto IV" as well as "Top Spin 3" and "Sid Meier's Civilization Revolution".
The company's quarterly earnings per share, excluding items, breezed past Wall Street expectations, as did its quarterly revenue. Looking forward, the company lowered its revenue and earnings outlook for the fourth quarter but raised its revenue and earnings forecast for the full year.
In recent trading, the major averages continue to trend higher, with the Dow lingering near the unchanged line after briefly turning positive. The Dow is currently down 6.51 at 11,181.72, the Nasdaq is down 10.80 at 2,248.24 and the S&P 500 is down 3.27 at 1,233.56.
Sector News
Railroad stocks are turning in some of the worst performances, with the Dow Jones Railroad Index falling 1.7 percent. The index has been trending lower for the past three sessions, and it set a six-week intraday low earlier in the day.
Steel stocks are also showing considerable weakness. The Amex Steel Index is down 2.7 percent, extending a recent downtrend. With the decline, the index has fallen to its worst intraday level in seven months.
On Thursday, a Goldman Sachs analyst downgraded the entire steel sector to a Neutral rating due to multiple risks the industry is facing. The analyst stated that a strengthening dollar and softening steel prices have created selective investment opportunities.
Wireless stocks are also posting substantial losses, hurt by a 8.7 percent drop by Nokia (NOK | Quote | Chart | News | PowerRating). The Amex Wireless Index set a two-year intraday low earlier in the session and is currently down 2.1 percent. The weakness in Nokia comes after the company warned of a lower mobile device market share in the third quarter 2008.
Amid a sharp drop in oil prices, oil and oil service stocks are lower as well. The Amex Oil Index is down 2.4 percent, while the Philadelphia Oil Service Index is falling 2.2 percent. Utility, health insurance and housing stocks are also notably lower.
On the other hand, tobacco stocks are seeing significant buying interest. The Amex Tobacco Index is up 3.2 percent, reversing the decline seen in the previous session. Earlier in the day, the index set a three-week intraday high.
Altria (MO | Quote | Chart | News | PowerRating) is reportedly in advanced talks to buy tobacco maker UST Inc. (UST | Quote | Chart | News | PowerRating) for $10 billion. Altria has been interested in buying UST for a long time to expand into other tobacco products. This would be Altria's first acquisition since the spinning off Philip Morris International (PM | Quote | Chart | News | PowerRating) in March. UST is currently soaring 22.7 percent, while Altria is up 1.3 percent.
Disk drive stocks are benefitting from reports of merger talks as well. The strength in the sector comes on reports that Samsung Electronics (SSNLF | Quote | Chart | News | PowerRating) is planning to buy SanDisk (SNDK | Quote | Chart | News | PowerRating). SanDisk is up 28.2 percent, contributing to a 3.2 percent gain by the Amex Disk Drive Index.
Bank stocks are also showing notable strength after seeing weakness earlier in the day. The KBW Bank Index is up 1.8 percent, although it is reversing only a portion of the loss posted in the previous session.
Stocks In The News
Despite the weakness seen in the broader markets, Quicksilver (ZQK | Quote | Chart | News | PowerRating) is showing considerable strength after the company turned to profit in its third-quarter, primarily due to a narrower loss from discontinued operations. The company reaffirmed its full year earnings forecast.
Shares of the sports equipment and accessories company are up 12.7 percent, climbing off of a seven-month closing low set on Thursday.
ADC Telecommunications (ADCT | Quote | Chart | News | PowerRating) is also posting a substantial gain after the company reported its third quarter results. The company said it saw revenues rise to $390.2 million, while analysts were looking for revenues of $387.1 million. The stock is up 6.3 percent, although it has moved well off of its intraday high.
Meanwhile, National Semiconductor (NSM | Quote | Chart | News | PowerRating) is seeing some selling pressure after the company reported a decline in its second quarter profits on lower sales and higher expenses. The company also provided second quarter sales guidance that was below analysts' current estimates. The stock is currently trading lower by 1.2 percent after setting a five-month intraday low.
Other Markets
Stock markets across the Asia-Pacific region closed sharply lower on Friday after the U.S. market tumbled overnight, although they ended the day off their lows. Japan's Nikkei 225 index opened lower and declined further in early trading. Thereafter, the index moved mostly sideways to close down more than 3 percent.
The major European averages also saw significant weakness in Friday's session. The French CAC 40 Index and the German DAX Index closed down 2.5 percent and 2.4 percent, respectively, while the U.K.'s FTSE 100 Index declined 2.3 percent.
Meanwhile, treasuries have pared their gains in early afternoon trading as the stock markets attempt a recovery. The benchmark ten-year note is currently up slightly at 3.645 percent.
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