Stocks struggled to hold gains Friday as investors cheered an early pop from the smaller-than-expected job loss in May but techs and pharmas dragged and the weakeness began to seep into other sectors.
Nonfarm employers cut payrolls by 345,000last month, well below the 525,000-drop expected. And, the previous month was revised to show fewer jobs were lost than initially reported. The unemployment rate, however, jumped to 9.4 percent, the highest since August 1983 and higher than the 9.2 percent expected.
"Forget the unemployment rate—it lags," wrote Robert Brusca, an economists at Fact and Opinion Economics, in a morning note to clients. "Jobs are doing what they do at end recessions and in early recoveries ... Job gains by the fourth quarter—believe it," he said.
The news initially gave stocks a boost but that faded within the first hour of trading and stocks took a dive.
Traders "are very concerned how nonfarm payrolls can be down and unemployment high," said Mark McLain, managing director of trading at Ladenburg Thalmann. Plus, the last couple of days, there's been a sentiment change in the market, McLain explained, as traders take a step back after running up amid dismal economic data.
Still to come: April consumer-credit figures are due out at 3 pm ET, with $6 billion decline expected. These figures could be scrutinized more than usual, given the focus on tight credit markets.
Citigroup was in the spotlight following a report that the FDIC is mulling a shake-up of the bank's top management, including the ouster of CEO Vikram Pandit.
The auto sector will also be in focus as General Motors will announce a preliminary deal to sell its Saturn division to Penske Automotive Group.
GM is also expected to provide more than $2.5 billion of the $3.6 billion Platinum Equity needs to take control of auto-parts supplier Delphi, the Wall Street Journal reported.
And investors will be watching to see if any legal blockades will be thrown in front of Chrysler's plan to close dealerships.
Wal-Mart announced a $15 billion stock-repurchase plan.
DuPont was one of the few drags on the Dow after Bank of America and Merrill Lynch downgraded their ratings on the stock to "underperform"/"underweight," amid concerns that include patent expirations and rising crude prices.
In morning trading, crude was actually down about a dollar, trading below $68 a barrel.
Also dragging on the Dow was Merck after the pharmaceutical company's heart-failure drug, rolofylline, failed a late-stage study.
The Dow registered its highest close since Jan. 7 on Thursday, and the Nasdaq logged its best close since Oct. 6, after a report showed jobless claims fell last week and banks gained.
Techs and pharmas were weak Friday, leaving the Nasdaq bobbing in and out of negative territory.
Chips were particularly hard hit following a report that chip sales are expected to fall 21 percent worldwidethis year.
Applied Materials skidded after the CEO of the chip-equipment maker was quoted as saying there are no signs of a recovery in demand in the global chip market and Citigroup slashed its rating on the stock to "hold" from "buy."
Apple shares gained following news that CEO Steve Jobs would take back the reinslater this month. Jobs took a leave in January as he battled pancreating cancer.
Rio Tinto shares shot higher, and helped mining stocks lead Europe, after the miner scrapped a proposed deal with China's Chinalco by combining its iron ore operations with BHP Billiton. Asian stocks ended mostly higher.
AIG priced a secondary public offering of Transatlantic Holdings at $38 each as the insurer prepares to shed assets to repay a government loan package with $180 billion. Heavily traded Transatlantic shares were off more than 3 percent premarket after closing Thursday at $41.
And regional bank Keycorp rose after RBC upgraded the stock to "top pick" from "sector perform."
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