(RTTNews) - Stocks have pared their losses in afternoon trading on Friday, as investors look for bargains following a dismal performance in the previous session. While a disappointing employment report had some investors skittish, strength in the financial sector is prompting some investors to buy into the markets.

The markets saw earlier weakness after 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.

Merrill Lynch (MER) added to the selling pressure after a Goldman Sachs analyst downgraded the stock to a Sell rating with the expectation that the company will see further write-downs.

Nonetheless, there have been some bright spots in the markets. A Sandler O’Neill & Co. analyst commented on Lehman Brothers (LEH), saying that he expected the investment bank to survive the credit crisis. Lehman Brothers has seen considerable volatility in recent weeks on speculation that it will strike a deal to receive a capital injection.

Additionally, there have been news reports of several acquisition deals including SanDisk (SNDK) and UST Inc. (UST).

In recent trading, the major averages have turned mixed, with only the Nasdaq remaining under the unchanged line. While the Nasdaq is currently down 7.83 at 2,251.21, the Dow is up 7.74 at 11,195.97 and the S&P 500 is up 0.24 at 1,237.07.

Dow Components

The Dow components have pared their earlier losses, and the blue chip index is lingering near the unchanged line. Of the 30 stocks that make up the Dow, 14 are showing weakness, while 16 are seeing gains.

Alcoa (AA) is one of the biggest decliners in the Dow, hurt by the negative economic news. Shares of the aluminum producer are currently trading lower by 1.8 percent. The stock has been in a downtrend throughout the week, and it is on track to close at its worst level in over a year.

Microsoft (MSFT) is also seeing significant selling pressure. The software giant is falling 1.8 percent, extending a recent trend lower. With the decline, the stock is on track to set a monthly closing low. Starting today, Microsoft will offer the Xbox360 at a new low price of $199 in the United States, down from the earlier price of $279.

Following a sharp drop in oil prices, Chevron (CVX) and Exxon Mobil (XOM) are both showing considerable weakness as well. Chevron is down 1.5 percent, compared to a 0.3 percent decline by Exxon Mobil.

Oil prices plunged again on Friday, adding to a multi-month low. Light sweet crude for December is currently down $1.63 at $106.26 a barrel. Prices hit as low as $105.13 a barrel, dropping below Tuesday’s low. The disappointing jobs data has increased concerns over energy demand.

Other Dow components that are posting losses include United Technologies (UTX), Walt Disney (DIS) and 3M (MMM). United Technologies is down 1 percent, Walt Disney is down 1 percent and 3M is down 0.4 percent.

On the other hand, financial stocks are showing the most strength within the Dow, including AIG (AIG), Citigroup (C), JP Morgan (JPM) and Bank of America (BAC). AIG is up 2.8 percent, Citigroup is up 3.1 percent, JP Morgan is up 3.2 percent and Bank of America is up 3.9 percent.

Sector News

Utility stocks are turning in some of the worst performances in afternoon trading. The Philadelphia Utility Index is currently down 2.2 percent, extending a substantial decline that has run through the week. With the decline, the index is on track to set a yearly closing low.

Within the utility sector, Exelon (EXC) is one of the biggest losers. The stock is on track to set a yearly closing low after seeing declines throughout the week. On Thursday, the utility company boosted its adjusted earnings forecast for 2008, but it remains in a range just under Wall Street’s estimates. Shares of Exelon are currently down 7.3 percent.

Wireless stocks are also coming under pressure. The Amex Wireless Index is down 1.8 percent, on track to set a five-month closing low. Nokia (NOK) is contributing to the decline, as it falls8.1 percent. Earlier in the session, the company warned of a lower mobile device market share in the third quarter 2008.

Other stocks that are seeing notable declines include steel, railroad and health insurance stocks. The Amex Steel Index is down 1.1 percent, the Dow Jones Railroad Index is down 1.3 percent and the Morgan Stanley Healthcare Payor Index is down 1.2 percent.

On the other hand, UST Inc. is contributing to strength in the tobacco sector. UST is up 23.7 percent on reports that Altria (MO) is looking to acquire the company for $10 billion. The Amex Tobacco Index is up 3.5 percent.

Disk drive stocks are sharply higher as well, with the Amex Disk Drive Index climbing 3 percent. The index is bouncing off of a monthly closing low set in the previous session.

SanDisk is boosting the sector on news that Samsung Electronics (SSNLF) is planning to buy the U.S-based memory chipmaker. Shares of SanDisk are up 28.3 percent, ending a recent trend lower.

Bank stocks are also posting notable gains, with the KBW Bank Index climbing 3.5 percent. Within the bank sector, Comerica (CMA) is one of the biggest gainers. The stock is up 7.8 percent after the bank said in a regulatory filing that it expects to see improvement in its net interest margins in 2009.

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. The major European averages also saw significant weakness in Friday’s session. The U.K.’s FTSE 100 Index declined 2.3 percent.

Meanwhile, treasuries have pared most of their gains, although the benchmark ten-year note is lingering just above the unchanged market. Subsequently, the yield on the ten-year note is currently down 1.7 basis points at 3.626 percent.

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Posted in Categories: Economy, Eurozone, Releases, USA.

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