U.S. stocks closed slightly lower Friday, as gains in utilities offset declines in financials after a sharp miss on the May jobs report.
The major averages came well off session lows to close slightly lower on the day and narrowly mixed for the week. The Dow Jones industrial average closed about 31 points lower after earlier falling 148 points with Goldman Sachs contributing the most to declines.
Utilities closed 1.66 percent higher to lead S&P 500 advancers, while financials ended nearly 1.4 percent lower as the greatest laggard. The Bank and Regional Banking ETFs pared losses to close about 2.1 percent and 1.9 percent lower, respectively.
"Positioning is still playing a big role. The positioning coming into the day was the economy's strong and the Fed will hike ... and today's action is just an unwind of that," said Ilya Feygin, managing director and senior strategist at WallachBeth Capital.
He also noted some support for the S&P 500 around 2,084/2,085 and the weaker U.S. dollar.
Traders also attributed some of the recovery to short-covering.
The S&P 500 briefly topped the psychologically key 2,100 level intraday but closed a touch below and little changed on the week.
"I do think sooner or later bad news does become bad news and the only reason why they're taking us back to 2,100 on the SPX is the odds of a July hike have dropped and the Fed's going to hold off," said John Caruso, senior market strategist at RJO Futures.
, well below April's 55.7 print. The employment component fell to 49.7 from 53.0 in April.
"That confirms there is a deceleration in the private sector, in the services sector that is more than manufacturing or mining and energy," said Gene Tannuzzo, senior portfolio manager at Columbia Threadneedle's Strategic Income Fund.
"The rally in risky assets we've seen is probably going to be temporary because a slowing U.S. economy is not good for risk," said Lee Ferridge, head of macro strategy, North America, at State Street Global Markets.
The U.S. dollar index fell 1.67 percent for its worst day since Dec. 3. (Tweet This) The euro around $1.135 and the yen around 106.6 yen against the greenback.
The May jobs report showed creation of 38,000 jobs, well below expectations. Analysts noted the Verizon workers' strike likely made the number lower than it would have been.
"However, even if we adjust (for the strike) it's still a very weak report," said Tim Hopper, chief economist at TIAA Global Asset Management, noting the three-month trend remained positive and the number of headlines jobs created should decline as the economy moves toward full employment.
"We believe the Fed is ready to hike and they want to hike. I don't see anything in the numbers today that would suggest they wouldn't hike," Hopper said.
Read MoreJuly hike still possible
Fed funds futures showed markets were pricing in an 8 percent chance of a June rate hike, and 33 percent in July, according to RBS. Chances for a September hike were 54 percent, and 90 percent in December, with the first full rate hike now factored in for March 2017, RBS said.
"I think this employment number was a fluke and an aberration," said Peter Cardillo, chief market economist at First Standard Financial. "I don't think it points to a real slowdown. Investors are beginning to have second thoughts about it."
In other economic news, factory orders rose 1.9 percent in April.
The final Markit services PMI was 51.3 in May, down from 52.8 in April and well below the post-crisis average of 55.6, Markit said.
"I think some of the slowdown on the jobs growth reflects the slow growth we saw in the first quarter and the fourth quarter," said Kate Warne, investment strategist at Edward Jones.
U.S. crude oil futures settled down 55 cents, or 1.12 percent, at $48.62 a barrel. The U.S. rig count rose for the first time in 11 weeks.
Fed Governor Lael Brainard, a voting member of the FOMC, said risk-management suggests waiting to raise rates and she wants to see more data before a rate hike.
There could be two rate hikes in 2016 if data continue to be favorable but the timing of both won't prove to be crucial, Chicago Fed President Charles Evans told CNBC earlier. He also said the June 23 U.K. vote on whether to leave the European Union is "a very critical decision."
Fed Chair Janet Yellen is due to speak midday Monday ahead of the central bank's meeting scheduled for June 14 and 15.
"I think that the key thing to watch (is) what Janet Yellen says over the next couple of weeks," said Scott Brown, chief economist at Raymond James.
"It's really the economic numbers that are going to matter more than anything," he said. "If we were to see a jobs rebound in the next few months they could raise rates but my sense is things are very mixed out there."
European stocks closed lower, with the German DAX off 1 percent.
Asian stocks closed slightly higher, with the Shanghai composite and Nikkei 225 both up about half a percent.
Overnight, the Markit Caixin China services PMI fell to 51.2 in May, from 51.8 in the previous month.
The index closed 0.37 percent lower for the week, with Nike the worst performer and Caterpillar the best.
The S&P 500 closed down 6.13 points, or 0.29 percent, at 2,099.13, with financials leading six sectors lower and utilities the top advancer.
The S&P closed up 0.07 points for the week, with utilities the top performer and financials the worst.
The Nasdaq composite closed down 28.85 points, or 0.58 percent, at 4,942.52.
The CBOE Volatility Index (VIX), widely considered the best gauge of fear in the market, declined to 13.4.
Advancers were a step ahead of decliners on the New York Stock Exchange, with an exchange volume of 898 million and a composite volume of nearly 3.6 billion in the close.
High-frequency trading accounted for 49 percent of June's daily trading volume of about 6.52 billion shares, according to TABB Group. During the peak levels of high-frequency trading in 2009, about 61 percent of 9.8 billion of average daily shares traded were executed by high-frequency traders.
Gold futures for August delivery settled $30.30 higher at $1,242.90 an ounce.
Correction: This story has been revised to reflect the factory orders report was for April and that gold futures settled at $1,242.90 an ounce.
On tap this week:
3 a.m. Cleveland Fed President Loretta Mester
*Planner subject to change.
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