A dismal jobs report drove shares lower on Friday on fears of an economic slowdown, but with the market facing five weeks of losses, signs of growth in the U.S. services sector lifted stocks off their lows.
The three major U.S. stock indexes fell more than 1 percent to hit session lows shortly after the open following the government's report that only 54,000 jobs were added in May -- far less than even reduced expectations. This was the weakest reading since September for U.S. non-farm payrolls growth, while the country's jobless rate rose to 9.1 percent in May from 9 percent in April.
But investors latched on to a report from the Institute for Supply Management showing growth in the huge U.S. services sector accelerated in May, a welcome sign after the recent glut of weak data. The ISM services-sector data gave a boost to the stock market, which cut its losses almost in half.
People have come to the conclusion that the economy is in a slow patch right now, and people are trying to figure out how temporary this slower growth is -- whether it's actually a change or a bump in the road for the recovery, and right now it's a bump in the road, said Giri Cherukuri, head trader at Oakbrook Investments in Lisle, Illinois,
The Dow Jones industrial average <.DJI> dropped 68.23 points, or 0.56 percent, to 12,180.32. The Standard & Poor's 500 Index <.SPX> fell 7.31 points, or 0.56 percent, to 1,305.63. The Nasdaq Composite Index <.IXIC> lost 19.87 points, or 0.72 percent, to 2,753.44.
Recent data on manufacturing, housing and the consumer sector have pointed to a slowing economy, prompting debate among investors about the duration of the economic softness.
After the S&P 500 closed on April 29th at 1,363.61, its highest level since June 2008, the benchmark index has dropped 4.2 percent.
Stocks are trading at their lowest in six weeks.
Analysts point to the S&P 500's intraday low of 1,294.70 on April 18 as a technical support level, a number that the index tested and bounced off on Friday.
For the year, though, stocks still are positive, with the Dow up 5.2 percent, while the S&P 500 and the Nasdaq are each up 3.8 percent.
Certainly the jobs number wasn't good. The ISM service number was pretty good. It gives us some comfort that this economic soft patch we are looking at is just that -- a temporary soft patch -- rather than the start of a double-dip recession, said Phil Orlando, chief equity market strategist at Federated Investors in New York.
It's just one data point. It's a snapshot in time. We've got to see a lot more of that, and I don't know that we are going to see that right here.
Newell Rubbermaid Inc
(Editing by Jan Paschal)