U.S. stocks could face further pressure next week unless investors get some relief from worries about Europe, jobs and the toll they might take on the economic recovery.
Reports on retail sales and consumer sentiment, both of which should offer clues on the outlook for spending, are among the coming week's major economic indicators. Also on tap will be international trade data.
The impact of BP's massive Gulf Coast oil spill on the environment and the energy industry also is likely to stay in focus, with moves to contain the spill so far having failed.
The three major U.S. stock indexes sank on Friday, with the Standard & Poor's 500 index <.SPX> suffering its worst percentage drop since May 20 after a disappointing U.S. jobs report and fresh concerns that the European debt crisis was spreading.
I think we're going to take our clues from what's happening in Europe as it seems to be the emotional drain on the market, said Robert Froehlich, senior managing director of The Hartford Mutual Funds in Simsbury, Connecticut.
In addition, the S&P 500 on Friday closed at its lowest level since February, falling below 1,070 and 1,065, the intraday low from the May 6 sell-off. Both were seen as support levels by technicians.
It means the downtrend from late April is reasserted, said Chris Burba, short-term market technician at Standard & Poor's in New York.
For the week, the Dow Jones industrial average <.DJI> fell 2 percent, while the S&P 500 declined 2.3 percent and the Nasdaq <.IXIC> lost 1.7 percent.
The S&P 500 is also down 12.5 percent from its April 23 closing high for the year.
The CBOE Volatility Index <.VIX> rose sharply as the U.S. stock indexes tumbled on Friday. The VIX, which is Wall Street's favorite measure of investor fear, jumped 20.4 percent to close at 35.48.
Among factors worrying investors on Friday, the U.S. government's report showed weaker-than-expected job growth for May, with a large portion of those being temporary hirings for the U.S. Census.
Overseas, a Hungarian official said the country was at risk of a Greek-style crisis.
(It) is just another in a line of worries coming out of Europe regarding budget deficits and the ability to control spending, said Michael Sheldon, chief market strategist at RDM Financial, in Westport, Connecticut.
The energy sector started the holiday-shortened week with a sharp drop after yet another failed attempt to halt the oil spill in the Gulf.
By the close of trading on Friday, energy shares had lost more ground as BP said it had begun capturing oil spewing from the ruptured Gulf of Mexico well. But tar balls washed up ashore in Florida and the political heat on BP increased as Washington and investors pressed for the British company to free up cash to take care of the damage.
In another blow, U.S. crude oil futures fell 4.2 percent, or $3.10, to settle on Friday at $71.51 a barrel as the U.S. payrolls data and Europe's bank woes stirred worries about economic recovery and energy demand.
An S&P index of energy shares <.GSPE> slid 3.5 percent on Friday, while Exxon Mobil Corp lost 3.2 percent to end at $59.62. New York-traded shares of BP sank 5.3 percent to$37.16.
HOPING FOR KA-CHING!
Next week, retail sales could be key, Froelich said.
If we get a strong number, we could reverse everything that was negative with this employment report today.
The Commerce Department's May report on U.S. retail sales, due Friday, is forecast to show an anemic gain of 0.2 percent versus an April gain of 0.4 percent, according to a Reuters poll.
Ex-autos, the forecast is for a gain of just 0.1 percent compared with a rise of 0.4 percent in the previous report.
However, the Thomson Reuters/University of Michigan's Surveys of Consumers, also due on Friday, is forecast to show a preliminary June reading of consumer sentiment at 74.5 -- up from the final May sentiment reading of 73.6.
On Thursday, a report on the international trade deficit for April is forecast to show a trade gap of $41 billion versus a March deficit of $40.42 billion. The March figure was a 15-month high.
The federal budget for May is expected to show a deficit of $140.0 billion versus $189.65 billion previously.
The data could affect the dollar, which has been rising against the euro. On Friday, the euro fell against the dollar to below $1.20 for the first time in more than four years.
That hurts the outlook for U.S. companies that rely heavily on overseas sales.
Initial jobless claims for the week ended June 5, also expected on Thursday, are forecast to decline slightly. But continuing claims for the week ended May 29 are seen flat, at 4.64 million versus about 4.67 million for the previous week.
(Reporting by Caroline Valetkevitch; Additional reporting by Leah Schnurr; Editing by Jan Paschal)