U.S. stocks declined Friday after government data showed the economy created just 38,000 jobs last month, the weakest level of hiring in six years.
The weak jobs report is likely to prompt the Federal Reserve to delay rate increases this month, according to analysts.
The S&P 500 index SPX, -0.73% retreated from its 7-month high, notched on Wednesday. The index was down 16 points, or 0.8% at 2,089 and on track to finish the week lower. Financial stocks fell sharply with the exchange-traded Financial Select Sector ETF XLF, -2.18% slumping 1.6%. Lower rates can impede banks’ ability to generate profits.
Consumer discretionary stocks were also sharply lower, with the sector trading down 1.8%.
Dow Jones Industrial Average futures DJIA, -0.62% fell 113 points, or 0.6%, to 17,729, with J.P. Morgan Chase & Co JPM, -3.15% and Goldman Sachs Group Inc. GS, -3.10% , leading losses with a 3% drop. The Nasdaq Composite index COMP, -0.97% declined 41 points, or 0.8%, to 4,929.
Meanwhile, U.S. Treasurys, which are also sensitive to shifts in rate-hike expectations, saw their prices soar, pushing yields sharply lower as doubts about the vigor of the economy and a possible delay in rate hikes sparked buying appetite for the safety of government bonds. The benchmark 10-year Treasury yield TMUBMUSD10Y, -4.66% fell 8 basis points to 1.70%.
“This jobs report is truly disappointing even after accounting for Verizon strikes. It gives a lot of ammunition for the Fed to wait longer before raising rate and certainly puts in doubt a rate hike in June,” said Quincy Krosby, market strategist at Prudential Financial.
“So far, the market is taking the bad news as bad news. More importantly we will see if Janet Yellen sees it as bad news,” Krosby said.
Federal Reserve Chair Janet Yellen is scheduled to give a speech to the World Affairs Council of Philadelphia on Monday.
Kristina Hooper, U.S. investment strategist for Allianz Global Investors, said she would write off a June rate hike completely just yet.
“Odds of a June rate hike diminished but the Fed might still do something less conventional, like a smaller, 12.5 basis point increase,” she said.
Brent crude LCOQ6, -0.84% hovered below $50 a barrel as traders weighed upbeat oil data from Thursday against the decision by the Organization of the Petroleum Exporting Countries not to impose a production ceiling. WTI crude CLN6, -0.89% was lower at $48.80 a barrel.
European markets SXXP, -1.41% gave up earlier gains and were heading south. Asian ADOW, +1.22% markets saw moderate gains. The Shanghai Composite Index SHCOMP, +0.46% broke six-straight weeks of losses, gaining 4.2% on hopes mainland Chinese shares could get MSCI acceptance.
Nonfarm payrolls on tap: The U.S. created just 38,000 new jobs in May and hiring in the prior two months was weaker than originally reported. The unemployment rate fell to 4.7% from 5% as 664,000 people left the labor force in May.
Separately, U.S. trade deficit climbed 5.3% in April to $37.4 billion.
More data are ahead with the Institute for Supply Management nonmanufacturing survey for May and a reading on factory orders for April scheduled for release at 10 a.m. Eastern.
Fed speakers: Speaking in London Friday, Chicago Federal Reserve President Charles Evans said there is a “reasonable case” for holding off increasing the federal-funds rate until core inflation gets above 2% on a sustainable basis.
Fed Gov. Lael Brainard will speak on economic outlook and monetary policy at the Council on Foreign Relations at 12:30 p.m. Eastern.
Stocks to watch: Talen Energy Corp. TLN, +16.54% soared 17% on news the independent power producer has agreed to be acquired by private investment company Riverstone Holdings, which will pay $14 a share for each one of Talen that it doesn’t own.
Air carriers United Continental Holdings Inc. UAL, -2.57% and Delta Air Lines Inc. DAL, -2.12% are among those considering bids for Avianca Holdings SA, The Wall Street Journal reported, citing sources. Shares in both companies fell about 3%.