Stocks ended the holiday-shortened week with a major selloff after as surprisingly weak monthly employment report sparked worries of a U.S. economic recession.
The Dow Jones Industrial Average posted a weekly loss of 1.8%, the S&P 500 fell 1.4% and the Nasdaq Composite declined 1.2%.
For the year, the blue chip Dow index remains up 5.2% in 2007, the benchmark S&P 500 is up 2.5% and the Nasdaq has gained 6.2%.
Stocks closed higher across the board on Tuesday as investors were encouraged by solid economic data and bid up technology and energy stocks.
"We're very, very bullish because we think the economy is going to continue to be in a positive trajectory," said Tony Dwyer, equity market strategist at FTN Midwest Securities. "We've been anticipating this mid-cycle slowdown ... the bull story is that business spending remains positive."
Gains on Tuesday were broad-based with all ten S&P economic sectors trading higher. Energy stocks such as Exxon Mobil led gainers, as crude oil prices rose to just above $75 a barrel.
Strong advances in tech shares such as Apple and Yahoo gave a lift to the Nasdaq Composite, which posted its best four-day gain since November 2003, gaining 5.2% in the past four sessions.
Stocks closed broadly lower on Wednesday and the Dow saw a triple-digit loss amid mixed signals from the Federal Reserve and weak economic data.
"I think the market is going through a tremendous amount of uncertainties," said John Manley, private client strategist at Smith Barney. "There's a lot of bipolar risks, we could go one way or the other. People are nervous about that ... more than anything specifically fundamental."
The Fed's Beige Book report said that, outside of real estate, turmoil in the financial markets was having a limited impact on the rest of the economy. The comments were viewed as a mixed message as to whether or not the Fed will cut interest rates on Sept. 18.
Apple shares fell sharply after the company unexpectedly cut the price of its recently introduced iPhone. The Cupertino, Calif.-based company also announced a major overhaul of its entire line of popular iPod portable media players.
Stocks closed higher on Thursday on solid economic data but gains were limited due to uncertainty regarding a Fed rate cut.
The Institute of Supply Management's non-manufacturing index came in unchanged for August but was an indication of continued growth in the services sector, while a separate government report showed an uptick in worker productivity in the 2nd quarter to an annualized gain of 2.6%.
"The ISM was better, labor costs were good from an inflation standpoint and got things moving in the right direction," said Tom Schrader, managing director of listed trading at Stifel Nicolaus.
A number of retailers such as Wal-Mart Stores surprised to the upside with an August same-store sales gain of 3.1%, excluding sales of fuel, from a year ago. The sales gain was led by strong back-to-school gains. Analysts expected a gain of less than 2%.
Shares of Apple fell after the company said it will give those who bought the iPhone before yesterday's price cut $100 in store credit.
Campbell Soup posted quarterly profit below analysts' estimates despite strong sales of its V-8 vegetable juice, as the company overhauled its supply chain in Australia and Indonesia.
Stocks traded lower across the board on Friday after the government said U.S. nonfarm payrolls fell in August, triggering concerns of an economic recession. The Labor Department said nonfarm payrolls fell by 4,000 in August, the first monthly decline since 2003.
"This, unfortunately, really just adds fuel to the fire on the downside here," said Jack Ablin, chief investment officer at Harris Private Bank. "It looks like we are going to have a recession, maybe a weak one, but a recession nonetheless."
Harley-Davidson cut its profit and motorcycle shipment projections, sending shares down more than 8%.
Beazer Homes USA ended sharply lower after the homebuilder said it received default notices related to senior notes from U.S. Bank, the trustee for the notes. Beazer said the default notices were "invalid and without merit."