Stocks fell Friday after payrolls data for May came in below expectations, raising worries about the economy, while crude oil prices settled above $55 a barrel.
The Dow Jones industrial average (search) dropped 92.52 points, or 0.88 percent, to close at 10,460.97. The Standard & Poor's 500 Index (search) dropped 8.27 points, or 0.69 percent, to 1,196.02. The technology-laced Nasdaq Composite Index (search) dropped 26.37 points, or 1.26 percent, to 2,071.43.
The Dow, the S&P 500 and the Nasdaq were all down for the week. The Dow fell 0.8 percent, while the S&P 500 and the Nasdaq each declined 0.2 percent.
"Obviously, people expected employment to be better and it wasn't," said Warren Simpson, managing director of Stephens Inc., a capital management company in Little Rock, Ark.
Wall Street was disappointed in the Labor Department's (search) non-farm payroll report, which showed only 78,000 new jobs in May, down sharply from the 274,000 created in April and far less than the 175,000 jobs economists had forecast. It was the worst showing for the monthly payroll report since August 2003.
The monthly employment figures are closely watched because a weak or stagnant job market tends to curtail consumer spending, the main driver of the U.S. economy.
"The more people working, the better off everybody is," Simpson said.
However, the stock market's losses were tempered as some investors speculated that the jobs report, along with other recent data showing a slower economy, would prompt the Federal Reserve (search) to halt its policy of raising interest rates sooner than expected.
"The big takeaway here is that this increases the likelihood that the Fed will move to the sidelines sooner rather than later," said Michael Sheldon, chief market strategist at Spencer Clarke LLC. "Otherwise, there are a lot of mixed signals on the economy right now, which makes it difficult to forecast."
With the economic data mixed at best and, at worst, showing a faster slowdown in growth than many had expected, the pressure will be on Fed Chairman Alan Greenspan (search) to justify continually raising the nation's benchmark interest rate, which stands at 3 percent, when he testifies on Capital Hill about the economy Thursday.
"This jobs figure has completely changed the debate on interest rates," said Jack Ablin, chief investment officer at Harris Private Bank in Chicago. "It went from the Fed pausing at around 3.5 to 4 percent, to maybe a three-and-a-quarter to 3.5 percent pause."
The Fed has risen rates by a quarter percentage point at each of its last eight meetings. The Fed's Open Market Committee, which sets rates, meets again June 29-30.
The climb in crude oil prices late Friday afternoon gave worried investors another reason to sell stocks, due to concerns that energy costs will crimp corporate profits and consumer spending. U.S. crude oil for July delivery settled at $55.03 a barrel, up $1.40, on the New York Mercantile Exchange (search).
The tune for the tech sector was called by Apple (AAPL) , which fell 4.5 percent, or $1.80, to $38.24 after a Web site, appleinsider.com, said the company is "overstocked on most iPod models with about a month remaining in its third fiscal quarter." The report cited unnamed sources.
An Apple spokeswoman said the company does not comment on "rumors and speculation."
The dollar rose against the euro as Italy's labor minister suggestion of a referendum to abandon the euro and bring back the lira, but the greenback was mixed against other major currencies. Gold prices rose sharply.
AIG (AIG), which is being sued by U.S. regulators over an accounting scandal, had its debt rating cut Friday by Standard & Poor's. The rating agency noted AIG's recent disclosure that it had overstated net income by 10 percent over the past five years. Shares of AIG, a Dow component, slid 1.4 percent, or 80 cents, to $55.09.
Only three of the 30 stocks in the Dow average were higher: Verizon Communications (VZ), up 2 cents at $35.19; Hewlett-Packard Co. (HPQ) , up 3 cents at $22.71, and Boeing Co. (BA), up 37 cents at $64.75.
Earlier Friday, the state-run Voice of Vietnam radio service reported that Vietnam is expected to sign a contract to buy four Boeing 787 "Dreamliner" jets, worth around $500 million at list price.
Elsewhere in the tech sector, shares of International Business Machines Corp. (IBM) dropped 2 percent, or $1.56, and ranked among the Dow's biggest percentage decliners.
Research In Motion Ltd. (RIMM) slipped 3.3 percent to $80.36. RBC Capital Markets Thursday downgraded Research In Motion to "sector perform" from "outperform", citing looming competitive threats to its BlackBerry wireless e-mail device.
In deal news, defense contractor Titan Corp. (TTN) fell 1.5 percent to $22.46 after L-3 Communications Holdings Inc. (LLL) announced a long-anticipated deal to buy Titan for about $2 billion. Titan shareholders will receive $23.10 per share, a modest 1.4 percent premium. Titan shares had run up in recent weeks in anticipation of a deal. L-3 shares shot up 4.9 percent to $74.52.
U.S. spirits maker Constellation Brands Inc. (STZ) is reportedly firming up a $14 billion counter-bid for British rival Allied Domecq PLC (AED), which has already had a takeover bid from French firm Pernod Ricard. Allied Domecq rose 24 cents to $51.10 on the news, while Constellation lost 5 cents to $27.52.
Intel Corp. (INTC) slipped 2 cents to $27.57 even after two brokerage houses lifted their quarterly revenue and profit forecasts for the Dow component, citing strong sales of notebook microprocessors and rising demand in Asia.
About 1.29 billion shares changed hands on the NYSE, below the 1.46 billion daily average for last year. About 1.67 billion shares were traded on Nasdaq, below the 1.81 billion daily average last year.
The number of shares that declined in value exceeded those that gained by a ratio of about 9 to 7 on the NYSE. On Nasdaq, decliners outnumbered advancers by about 19 to 11.
The Russell 2000 index of smaller companies was down 4.94, or 0.79 percent, at 620.30.
Overseas, Japan's Nikkei stock average rose 0.18 percent. In Europe, Britain's FTSE 100 was down 0.11 percent, France's CAC-40 lost 0.51 percent for the session, and Germany's DAX index fell 0.48 percent in late trading.
Reuters and the Associated Press contributed to this report.