Updated from 4:10 p.m. EDT
Stocks closed narrowly mixed Friday as enthusiasm over the interest rate implications of a weak employment report gave way to concerns about the economy and the situation in Iran.
After opening the session higher, the
Dow Jones Industrial Average
ended the day down 12.41 points, or 0.11%, to 11,247.87. The
rose 2.51 points, or 0.2%, to 1288.22, and the
slipped half a point to 2219.41, having been up as many as 14 points earlier.
"What we thought would keep the Fed on the sidelines wasn't good enough news today," said Art Hogan, chief market analyst with Jefferies. "There's a combination of disappointments we saw today. We had a jobs creation number that was too low and energy prices going too high today. It's not painting a very pretty picture for corporate profits."
Barry Hyman, equity market strategist with EKN Financial, said the S&P's finish in positive territory was a sign of a market trying to maintain itself. "The market is still struggling with whether we have high inflation or we're due for an economic slowdown, which even after the data today we still aren't sure about," he said.
About 1.57 billion shares changed hands on the
New York Stock Exchange
, where advancers outpaced decliners by a 2-to-1 margin. Volume on the Nasdaq was 1.92 billion shares, and winners edged losers 8 to 7.
For the week, the S&P 500 added 8 points, or 0.6%, and the Nasdaq gained 9 points, or 0.4%. The Dow, meanwhile, fell 31 points, or 0.3%.
The Labor Department said 75,000 nonfarm jobs were created in May, whereas economists had expected around 170,000 new jobs. The unemployment rate edged down to 4.6% from 4.7% in April. Average hourly earnings grew 0.1%, less brisk than the average 0.3% estimate. Payroll gains in March and April were revised down by a combined 37,000 jobs.
To view Gregg Greenberg's video take on today's market, click here
"The realization that we have a slowing economy crept into the market in May and is now taking hold," said Paul Nolte, director of investments with Hinsdale Associates. "The growth story of the economy is no longer there and this will have an effect on corporate profits. The
may step aside, but the economy is slowing down, and expected gross domestic product growth is at risk."
Bonds rocketed higher. The 10-year Treasury note was up 28/32 in price to yield 4.99%, down from 5.09% prior to the jobs report and putting it below the fed funds rate. The dollar weakened against the yen and euro.
The data will force the Federal Reserve to think carefully about whether it wants to raise interest rates again when it meets later this month. Worries about how far inflationary concerns will ultimately take rates have ruled the market in recent months, and any data suggesting a moderating economy have tended to boost stocks.
The Fed has tightened at 16 straight meetings going back nearly two years, and the fed funds target rate now stands at 5%. The odds of a hike at the meeting sank to 48% from 72% before the numbers were released.
"This number is weak enough to put rate hikes on hold at the June meeting," said Paul Nolte, director of investments with Hinsdale Associates. "Bonds were rallying behind this number."
Michael Sheldon, chief market strategist with Spencer Clarke, said the report was a strange one. "We had a fall in the unemployment rate, but the headline number was well below estimates," he pointed out. "Some of the wage pressures from last month moved lower, sending the year-over-year rate lower."
Sheldon said that when the report is combined with the increase in weekly jobless claims over the past weeks, the Fed can afford to pause "for at least a brief period of time. We're still concerned about inflation, so we'll have to watch the next few reports for anything different."
During a speech to a business group, Chicago Fed President Michael Moskow said that core inflation is still running at the "upper end of my comfort zone." Moskow also said that policy used to bring inflation back into his range of 1% to 2% is uncertain, noting that "the current environment of price stability, and the Fed's credibility to defend it, give the economy the ability to weather short-term challenges and provide a solid foundation to expand over time."
Regarding the employment report, Moskow said that "an unemployment rate of 4.6% likely indicates a vibrant labor market in which more firms may begin to bid up wages to attract and retain workers."
Oil rose as U.S. officials stepped up the rhetoric against Iran, whose nuclear research program has become an international flashpoint.
quoted U.S. intelligence czar John Negroponte warning Friday that Iran could have a nuclear bomb by 2010. In Nymex floor trading, July crude rose $1.99 to close at $72.33 a barrel.
quoted the deputy head of Iran's Atomic Energy Organization, Mohammad Saeedi, saying "Iran is determined to go ahead with its nuclear enrichment work for peaceful purposes."
In the metals markets, gold rose $7.50 to $641 an ounce, copper gained 11 cents to $3.59 a pound, and silver was up 18 cents to $12.09 an ounce. Reports that China was preparing to dump copper in international markets triggered a selloff in all three metals Thursday, although gold and silver pared their decline by the close.
Elsewhere on the economic front, the Commerce Department said that factory orders fell 1.8% in April after a revised 4% rise in March. The decline was in line with economists' expectations.
In corporate news Friday,
has a definitive agreement to merge with European exchange operator Euronext in a deal worth a little more than $10 billion. The transaction still needs shareholder and regulatory approvals. The stock was higher by $2.06, or 3.3%, to close at $64.51.
slashed second-quarter and full-year earnings guidance due to a 29% year-over-year decline in April and May new orders. The homebuilder cited an inventory glut, more cancellations and rising interest rates. Shares fell $1.70, or 5.2%, to $31.33.
, was downgraded Friday by JMP Securities, which cited margin pressure. Hovnanian shares rose about 4% on Thursday following a second-quarter earnings beat. Shares lost 91 cents, or 2.7%, to $32.36.
The decline in both homebuilders pulled the Philadelphia Housing Sector index down 1.3%. Meanwhile, the Philadelphia/KBW Bank Sector index was higher by 0.5%, and the Philadelphia Semiconductor Sector index finished down 0.2%.
The jostling for
consumer health care business is picking up, with
reportedly preparing a $15 billion bid. The unit generates nearly $4 billion in revenue from over-the-counter products like antacids.
said a court order terminating its contract with Toysrus.com could cost it as much as $50 million in operating profit this year. Amazon is appealing the ruling, which governed a distribution contract. Amazon gave up 31 cents, or 0.9%, to $34.76.
said same-store sales rose 7% in May, roughly matching forecasts, as blended drinks and food sales drove traffic. Overall sales rose 23% to $613 million. Starbucks lost 22 cents, or 0.6%, to $35.99.
also announced same-store sales results for May, with comp sales rising 9.8%. Analysts were expecting an increase of 7.7%. Walgreen was higher by $2.05, or 5.1%, to close at $42.65.
jumped 3.6% after Goldman Sachs raised its rating to outperform. The stock was also upgraded at Susquehanna and was the subject of positive research at Thomson Weisel. Ciena added 16 cents to $4.65.
Overseas markets were mostly higher, with London's FTSE 100 up 0.3% to 5765 and Germany's Xetra DAX losing 0.4% to 5687. In Asia, Japan's Nikkei surged 1.8% overnight to 15,789, while Hong Kong's Hang Seng jumped 1.7% to 15,913.