After moving sharply lower at the start of trading, stocks saw continued weakness throughout the trading session on Friday. The markets experienced broad based selling pressure following the release of a weaker than expected monthly employment report.
The major averages all closed firmly in negative territory, at their worst closing levels in over two months. The Dow fell 97.29 points or 0.8 percent to 12,151.26, the Nasdaq plummeted 40.53 points or 1.5 percent to 2,732.78 and the S&P 500 dropped 12.78 points or 1 percent to 1,300.16.
With the steep losses on the day, the major averages all fell 2.3 percent for the week. Both the Dow and the S&P 500 moved lower for the fifth consecutive week.
Before the start of trading, the Labor Department released a report showing much weaker than expected job growth in the month of May as well as an unexpected uptick in the unemployment rate.
The Labor Department said that the U.S. economy added just 54,000 jobs in May following the addition of 232,000 jobs in April. Economists had been expecting employment to increase by about 170,000 jobs, although recent data had suggested that the job growth was likely to miss estimates.
Additionally, the report showed that the unemployment rate unexpectedly edged up to 9.1 percent in May from 9.0 percent in the previous month.
Sal Guatieri, senior economist with BMO Capital Markets, said, "Any way you slice it, this is a weak report that cannot be explained solely by Japan's tragedy and bad weather, though it does follow a period of decent strength."
"The key question is whether businesses are only temporarily hitting the pause button on hiring because of increased uncertainty about the economic outlook, or whether they are hunkering down for a longer period," he added. "We still believe it's the former, but the next couple of months will tell."
Meanwhile, a report from the Institute for Supply Management showing an acceleration in the pace of growth in the service sector eased some of the concerns about the economy and offset some of the selling pressure on Wall Street.
The ISM said its non-manufacturing index, which tracks activity in the service sector, rose to 54.6 in May from 52.8 in April, with a reading above 50 indicating growth in the sector. Economists had been expecting the index to rise to a reading of 54.0.
Among individual stocks, shares of Newell Rubbermaid (NWL) fell 11.8 percent after the consumer products maker announced that it is adopting a more conservative 2011 sales and earnings outlook in light of disappointing economic conditions and weak consumer spending trends.
Sector News
Most of the major sectors moved to the downside on the day, reflecting broad based weakness in the markets. Telecom stocks saw significant weakness, dragging the NYSE Arca North American Telecommunications Index down by 2.2 percent to a one-month closing low.
American Tower (AMT) helped to lead the telecom sector lower, falling by 5.8 percent. The loss by American Tower came after the cellular tower operator said it received a subpoena from the SEC requesting documents related to its tax accounting and reporting.
Healthcare provider stocks also came under considerable selling pressure, resulting in a 2 percent loss by the Morgan Stanley Healthcare Provider Index. With the loss, the index ended the session at its lowest closing level in well over a month.
Semiconductor, transportation, internet, and housing stocks also posted notable losses on the day, while oil service stocks were among the few groups to buck the downtrend.
Other Markets
In overseas trading, stock markets in the Asia-Pacific region turned in a mixed performance on Friday amid uncertainty about the U.S. jobs report. Japan's Nikkei 225 Index fell by 0.7 percent, while China's Shanghai Composite Index advanced by 0.9 percent.
Meanwhile, the major European markets saw notable volatility over the course of the trading day. The German DAX Index eventually ended the session up by 0.5 percent, while the U.K.'s FTSE 100 Index edged up by 0.1 percent and the French CAC 40 Index closed nearly flat.
In the bond market, treasuries ended the day modestly higher but well off their highs for the session. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, closed down by 3.3 basis points at 2.997 percent after hitting a nearly six-month intraday low of 2.948 percent.
Looking Ahead
Following the slew of data that was released over the past week, the economic calendar for next week is relatively light. Nonetheless, traders are likely to keep an eye on reports on weekly jobless claims, the U.S. trade deficit and wholesale inventories.
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