Banks and other financial companies led a modest decline in US stocks on Friday after a report indicating that hiring slowed sharply in May put investors in a selling mood.
The market slide snapped a two-day winning streak and sent bond prices surging as investors sought safety in US government-backed debt. The dollar also fell sharply against several major currencies.
The downbeat jobs data appeared to convince traders that the Federal Reserve will keep interest rates low longer than previously expected. 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 Dow Jones industrial average fell 31.50 points, or 0. %, to 17,807.06. The Standard & Poor's 500 index lost 6.13 points, or 0.3%, to 2,099.13. The Nasdaq composite index gave up 28.85 points, or 0.6%, to 4,942.52.
The Labour Department reported that the US economy added only 38,000 jobs in May, the lowest amount in five years. The unemployment rate fell to 4.7% from 5%, but mainly because about half a million unemployed people stopped looking for work.
Separate reports out on Friday also showed a mixed snapshot of the economy. The Institute of Supply Management said US services firms grew in May at the slowest pace in more than two years, while the Commerce Department said orders to US factories rose in April by the largest amount in six months.
The weak hiring data fuelled speculation that the Fed will hold off on raising its key interest rate this summer, something Wall Street was anticipating could happen as soon as July. That weighed on banks and financial services companies, as low interest rates make it harder for banks to make money from loans.
ETrade Financial slumped 1.44 US dollars, or 5.1%, to 26.69 US dollars, while Charles Schwab lost 1.62 US dollars, or 5.3%, to 29.22 US dollars. Bank of America fell 3.5%, to 14.42 US dollars. Citigroup slid 1.58 US dollars, or 3.4 %, to 45.39 US dollars.
All told, financials sector companies posted the biggest drop in the in the S&P 500, sliding 1.4%. It is down 1.7% this year and is the only one of the 10 sectors in the index that's negative for 2016.
The prospect of interest rates holding steady made US bonds more attractive, sending their prices sharply higher. That demand spike, in turn, pushed the yield on the 10-year Treasury note down 1.70% from 1.80 late on Thursday.
"What you're seeing today is 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 JJ Kinahan, chief strategist at TD Ameritrade. "It's about pure yield."
The dollar also fell against other major currencies, falling to 106.68 yen from 108.91 the day before. The euro jumped to 1.1347 US dollars from 1.1148 US dollars.
Traders also piled money into precious and industrial metals. Gold rose 30.30 US dollars, or 2.5%, to 1,242.90 US dollars an ounce, while silver gained 2.1%, to 16.37 US dollars an ounce. Copper added 2.1 %, to 2.11 US dollars a pound.
The rally in metals helped polish shares in some mining companies. Newmont Mining jumped 3.05 US dollars, or 9.4%, to 35.40 US dollars, while Freeport-McMoRan added 4.2%, to 11.11 US dollars.
Utilities companies, which had been down of late as investors bet on the Fed raising rates sooner, rather than later, surged on Friday. The sector was the biggest gainer in the S&P 500, climbing 1.7%. It is now up 15% this year.
Benchmark US crude oil fell 1.1 % , to close at 48.62 US dollars a barrel in New York. Brent crude, which is used to price international oils, slid 0.8 % , to close at 49.64 US dollars a barrel in London.
In Europe, major stock indexes mostly fell. Germany's DAX fell 1%, while France's CAC 40 lost 1%. The FTSE 100 rose 0.4%.