Stocks were modestly lower after news the jobs picture hasn't improved as many investors had thought given several positive economic reports in recent weeks, including news Friday that the services sector continued to grow in November.
The Dow Jones Industrial Average fell more than 20 points, after rising nearly 1 percent in yesterday's session after a string of upbeat economic reports.
JPMorgan , American Express and AT&T fell, while DuPontand Alcoa rose.
The S&P 500 and the Nasdaq were down slightly. The CBOE Volatility Index, widely considered the best gauge of fear in the market, fell to nearly 18.
Among key S&P 500 sectors, financials, telecom and consumer discretionary fell, while materials and energy rose.
The dollar , meanwhile,fell more than 1 percent against a basket of currencies, a move that typically lends support to stocks. Gold meanwhile, soared above $1,400 an ounceas investors flocked to the safety of precious metals.
The jobs reporttook the wind out of the early December rally, which saw the market nearly return to November's highs in two days of trading.
"This is kind of a blow as we head into the end of the year, definitely," Dan Cook, chief executive of IG Markets told CNBC.com. "We’re not even staying above water at this point."
Cook noted that the long-term unemployment rate was unchanged at 17 percent, meaning there will be "still be a lot of structural unemployment."
The disappointing result likely means the Federal Reserve will continue with plans to boost the economy through long-term bond purchases, a policy known as quantitative easing, Cook said. (Read more: Bulls Believe Decline will be Muted).
As a result the markets may not react that strongly to the number. Typically, in fact, the market usually ends modestly up or down on the day of an employment report, even when the number is surprisingly bad, he added.
"We usually see a lot of quick moves and some profit taking, and it gets settled out at the end," Cook said.
"Many will argue the employment trend is moving in the right direction, albeit slowly, but it may not be enough to minimize further Fed involvement in 2011," Todd Schoenberger, managing director LandColt Trading told CNBC.com.
In addition, Schoenberger said the disappointing number from the Labor Department may open up a conversation about "QE3," referring to a third round of long-term bond purchases by the Fed.
As a result, the jobs report didn't trigger a sharp sell-off. Two other reasons: the disappointing number may lead Congress to extend jobless benefits for the unemployed, and may lead to a deal on extending the Bush-era tax cuts, Schoenberger said.
Specifically, investors need to know how the capital gains rate will be affected. If the rate is raised, investors who made money in the recent stock market rally may need to sell, he said.
"Today’s data may be just enough fuel to get everybody to the table to agree," Schoenberger said.
In corporate news, Google was planning to pay $1.8 billion for one of the biggest office buildings in Manhattan, according to published reports.
Walgreen's rose after report a 3.2 percent boost in same-store sales for November, thanks in part to pharmacy sales.
But Big Lots fell after reporting disappointing third-quarter profits and a weaker outlook than expected. The close-out retailer suffered from competition and a rise in debt-card processing fees. Rivals Dollar General was up slightly while Wal-Mart slipped.
Cascade's shares jumped after news demand for forklift attachment and other product boosted third-quarter profit for the maker of parts for the lift truck industry.
Financials led by the market lower Friday, a day after a positive report by Goldman Sachs sent the sector higher. Regional banks were leading the downturn, including BB&T , State Street , Zion's Bancorp and Valley National Bank .
In Washington D.C., a plan to cut the deficit developed by a panel appointed by President Obama fell short of votesto pass.
In economic news, the services sector grew more than expectedin November, according to the Institute for Supply Management. Factory orders, meanwhile, fell 0.9 percent in October to a seasonally adjusted $420 billion, indicating a broad decline in the manufacturing sector, according to the Commerce Department.
Nonfarm payrolls gained only 39,000 in November, far less than the 140,000 forecasted by economists surveyed by Reuters, according to the U.S. Labor Department. Private payrolls rose by 50,000, also less than expected.
Employment for September and October was revised to show 38,000 more jobs were created in those months than previously estimated.
European shares ended lower as the U.S. jobs report added to concerns over the ongoing debt crisis. Standard & Poor's said it may downgrade the debt rating of Greece depending on the rules attached to the country's recent bailout.
Asian indexes ended mixed after news reports suggested China could be set to continue its tightening of monetary policy.
In other news, the Federal Reserve's $600 billion bond buying program can be adjusted if necessary and will be subject to regular reviews, according to top Fed officials.
On tap next week:
MONDAY: Employment trends index, Richmond Federal Reserve President Lacker speaks, UN Climate Conference, MetLife shareholder meeting; before-the-bell earnings from Dollar General.
TUESDAY: Bank of Canada announcement, IBD/TIPP economic optimism index, three-year Treasury note auction, consumer credit, API weekly report, Ireland budget announcement, 3M investor meeting; before-the-bell earnings from AutoZone, BMO Financial and Vail Resorts; after-the-bell earnings from H&R Block and Novellus.
WEDNESDAY: McDonald's November sales, MBA mortgage applications, quarterly services survey, 10-year Treasury note auction; before-the-bell earnings from United Natural Foods.
THURSDAY: BOE announcement, jobless claims, wholesale inventories, 30-year Treasury bond auction, DuPont investor day; before-the-bell earnings from Costco and Lululemon Athletica; after-the-bell earnings from National Semi.
FRIDAY: International trade, import and export prices, consumer sentiment, and Treasury budget.
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