Stocks lower after weak jobs report
Banks and other financial firms led a modest decline in U.S. stocks Friday after a report indicating that hiring slowed sharply in May put investors in a selling mood.
The market slide broke a two-day win streak and sent bond prices surging as investors sought safety in U.S. government-backed debt.
The downbeat jobs data seemed to convince traders that the Federal Reserve will keep interest rates low longer. It also stirred concerns that the economy is slowing.
“What we don’t want to see is this number as a beginning of a series of weaker data,” said Quincy Krosby, a market strategist at Prudential Financial. “That’s going to affect the market.”
The speculation that the Fed will hold off on raising its key interest rate weighed on banks and financial services firms, as low interest rates make it harder for banks to make money from loans.
ETrade Financial sank 5.1% to $26.69, and Charles Schwab dropped 5.3% to $29.22. Bank of America fell 3.5% to $14.42.
All told, companies in the financial sector posted the biggest drop in the Standard & Poor's 500, sliding 1.4%. The sector is down 1.7% this year and is the only one of the 10 sectors in the index that is negative for 2016.
The prospect of interest rates holding steady made U.S. bonds more attractive, sending their prices sharply higher. That pushed the yield on the 10-year Treasury note down to 1.70% from 1.80%.
“Bonds are rallying because the thought that we’re going to see higher rates in the short term has come off the table a bit,” said J.J. Kinahan, chief strategist at TD Ameritrade. “It’s about pure yield.”
The dollar fell to 106.68 yen from 108.91 the day before. The euro jumped to $1.1347 from $1.1148.
Traders also piled money into precious and industrial metals. Gold rose $30.30, or 2.5%, to $1,242.90 an ounce, silver rose 34 cents, or 2.1%, to $16.37 an ounce, and copper rose 4 cents, or 2.1%, to $2.11 a pound.
Utilities firms, which had been down of late as investors bet on the Fed raising rates sooner rather than later, surged Friday. The sector was the biggest gainer in the S&P 500, climbing 1.7%. It’s now up 15% this year.
Investors also bid up shares in several companies reporting earnings or sales.
Broadcom climbed 4.9% to $162.56 after the communications chip maker’s quarterly profit beat expectations.
Ambarella jumped 9.4% to $46.47 after the video compression chip maker posted better-than-expected profit.
Gap rose 4.1% to $19.09 after the clothing chain operator reported late Wednesday that sales at established stores declined 6% in May, better than the 7% drop forecast by financial analysts.
Benchmark U.S. crude oil fell 55 cents, or 1.1%, to $48.62 a barrel. Brent crude slid 40 cents, or 0.8%, to $49.64. Natural gas dropped 1 cent to $2.398 per 1,000 cubic feet. Wholesale gasoline slid 3 cents, or 1.7%, to $1.61 a gallon.