U.S. equities closed lower in choppy trade on Friday as Wall Street digested a weaker-than-expected employment report and kept an eye on falling oil prices.
"I think that, after a number of days in which oil has risen on expectations of an OPEC deal, some investors are beginning to rethink the likelihood of a deal," said Kate Warne, investment strategist at Edward Jones. "For the past few days, we've seen some intraday volatility, especially in international markets. Given what happened with the pound overnight, I think investors are consolidating some positions."
U.S. crude extended losses around late-morning ET, and settled 63 cents lower at $49.81 per barrel. Gold futures traded slightly higher in afternoon ET, before settling lower and recording its worst week since 2013.
"Crude came off; gold came off; Treasurys came off. I think those reversals in the macro markets certainly spooked investors a little bit," said Jeremy Klein, chief market strategist at FBN Securities, soon after the Dow hit session lows. "It's fairly thin out there. You've got a three-day weekend. The bond guys are off, but we're not."
The S&P 500 closed 0.3 percent lower, with materials falling more than 1.5 percent to lead decliners. The Nasdaq composite fell 0.25 percent lower. The three major indexes had traded higher shortly after the open.
For the week, the three major indexes closed lower, snapping a three-week winning streak. Still, the SPDR S&P Bank ETF (KBE) rose 2.52 this week, marking its best weekly gain since August 5, when it rose 3.02 percent.
SPX week to date
The U.S. economy added 156,000 jobs last month and the unemployment rate ticked up to 5.0 percent, the Labor Department said Friday. Economists surveyed by Reuters had expected 176,000 new jobs and the jobless rate to hold at 4.9 percent. The total was a decline from the upwardly revised 167,000 jobs in August (compared to the original number of 151,000).
"It's kind of a good number, and it's not a bad number," said Art Hogan, chief market strategist at Wunderlich Securities. "If you drill down below the headline, did wages go up? Yes. Did hours go up? Yes. Did participation go up? Yes. That's what makes it good. What would've made it great? A number above 200,000."
Average hourly wages pushed higher, rising 6 cents to an annualized rate of 2.6 percent. The average work week also inched up one-tenth to 34.4 hours.
"Looking at the jobs picture, it was a bit disappointing, but I do think that wasn't unexpected," said Chris Benson, senior vice president at Pontoon. He said the labor market tends to slow down in the second half of the year.
"I think it's just enough to keep thing simmering along," said Tom Siomades, head of Hartford Funds Investment Consulting Group. "It's not so strong it puts November on the table, but it's not so bad that it takes December off the table. It's at room temperature, for lack of a better term."
Market expectations for a December rate hike were above 60 percent following the report's release, according to the CME Group's FedWatch tool.
"We're convinced, regardless of this number and any number afterwards, the Fed is going to raise rates in December. The Fed is hellbent on getting the funds rate back to 1 percent before the economy rolls over," said Phil Orlando, chief equity strategist at Federated Investors.
U.S. stock futures had traded slightly lower ahead of the report's release. After the data came out, Dow futures traded approximately 20 points higher, while S&P and Nasdaq futures traded half a point higher and 0.75 points higher, respectively.
"All in all, ... it's almost like we're seeing the last two months being repeated," said JJ Kinahan, chief strategist at TD Ameritrade, about the jobs report. "Everyone is saying this doesn't change anything. If you ask the Fed, they would take an unchanged jobs report because it strengthens their case to raise rates.
Elsewhere on the data front, the Commerce Department said August wholesale inventories fell more than previously reported in August.
Investors also kept an eye on the British pound, which fell more than 6 percent in two minutes against the dollar overnight, hitting fresh 31-year lows.
"The cause of the crash in the pound is still unknown, with a number of factors probably at play including a fat finger trade, very low liquidity, a large number of stops being triggered and algorithms exacerbating the move," said Craig Erlam, senior market analyst at Oanda, in a note.
"While the pound has recovered a large majority of its losses, it continues to trade well below yesterday's levels which just goes to show how pessimistic people are about the UK economy in a week in which people have come to realise that a hard Brexit, or something that resembles it, is not just a possibility but a probability," he said.
Sterling traded approximately 1.4 percent lower in afternoon ET, near $1.243. Reuters reported the British currency had fallen as low as $1.1491 on some trading platforms.
GBP/USD in 2016
Also on Friday's agenda were a number of Federal Reserve officials scheduled to speak, including Fed Governor Lael Brainard.
Fed Vice Chairman Stanley Fischer said Friday's jobs report was "pretty close" to a "Goldilocks" number. Cleveland Fed President Loretta Mester told CNBC's "Squawk Box" the jobs report was "solid," adding it's time for the U.S. central bank to raise interest rates.
U.S. Treasurys traded mixed, with the two-year note yield around 0.84 percent and the benchmark 10-year yield at 1.73 percent. The U.S. dollar slipped against a basket of currencies, with the euro near $1.118 and the yen around 103.03.
"I think it was a reaction to the jobs report," said Kathy Jones, chief fixed income strategist at Charles Schwab. "I thought it was a pretty good report, to tell you the truth. I'm surprised by how some people are down-playing it."
The Dow Jones industrial average closed 28.01 points lower, or 0.15 percent, at 18,240.49, with United Technologies leading decliners and Goldman Sachs the top advancer.
The fell 7.03 points, or 0.33 percent, to end at 2,153.74, with materials leading nine sectors lower and health care and financials the only advancers.
The Nasdaq slipped 14.45 points, or 0.27 percent, to close at 5,292.40.
About three stocks declined for every advancer at the New York Stock Exchange, with an exchange volume of 938.22 million and a composite volume of 3.510 billion at the close.
The CBOE Volatility Index (VIX), widely considered the best gauge of fear in the market, traded near 13.4.
Gold futures for December delivery settled $1.10 lower at $1,251.90 per ounce.
High-frequency trading accounted for 52 percent of October's daily trading volume of about 6.71 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.
—CNBC's Jeff Cox contributed to this report.
On tap this week:
*Planner subject to change.
4 p.m.: Federal Reserve Governor Lael Brainard speaks on blockchain technology