Stocks - Market Sags as Jobs Report Pushes Rates Higher

© Reuters.

Investing.com – Stocks don't respond well to rising interest rates. Sure enough, stocks fell back Friday when rates jumped thanks to a Labor Department report of a larger gain in non-farm payrolls than expected.

The declines were sizable early in the day, but that attracted buyers who didn't see a threat to the big rally that sent the U.S. stock market to record highs on Wednesday.

The close for the day showed only small declines. The S&P 500 was off just under 0.2%. So was the Dow . The NASDAQ Composite fell 0.1%. But there was a little drama in between. The Dow had fallen as many as 232 points before losses were cut.

But rates did end the day higher. The 10-year Treasury yield moved up to 2.048% from Wednesday's 1.953%.

Trading volume was light because many investors were taking the day off after the Independence Day Holiday.

The jobs report estimated that non-farm payrolls rose by 224,000 in June. Analysts surveyed by Investing.com had predicted a jump of 160,000. The unemployment rate ticked up slightly to 3.7%, still at levels last seen 50 years ago. But that was explained as more people looking for jobs.

The report showed strength in construction, manufacturing, finance, warehousing and distribution. Wholesale trade was off a little, as were logging and mining. The latter includes the oil industry.

For the week, the S&P 500 finished up 1.7% and is up 19.3% for the year. The Dow gained 1.2% and is up 15.4%. The Nasdaq's 1.9% gain pushed its year-to-date change to 22%.

The market came into Friday showing a few signs of vulnerability. The relative strength indexes of the Dow and S&P 500 had finished Wednesday just above above 70. That's a warning the indexes were getting overbought.

The market's strength was in banking, telecommunications and communications services, a category that now includes Facebook (NASDAQ:FB), Google parent Alphabet (NASDAQ:GOOGL) and Amazon.com (NASDAQ:AMZN). Amazon and Google were higher.

There was weakness in chip stocks after Samsung (KS:005930), the big Korean chip maker, cut guidance for its profits for the rest of the year.

JPMorgan Chase (NYSE:JPM), Goldman Sachs (NYSE:GS), Wells Fargo (NYSE:WFC) and Citigroup (NYSE:C) were among the winners.

Healthcare stocks fared less well. Pfizer (NYSE:PFE), Johnson & Johnson (NYSE:JNJ) and Merck (NYSE:MRK) were all lower.

Winners and Losers in the S&P 500

Investment firm Jefferies Financial Group (NYSE:JEF), department store operator Nordstrom (NYSE:JWN) and Concho Resources (NYSE:CXO) were among the S&P 500's top performers.

Electronic Arts (NASDAQ:EA), IPG Photonics (NASDAQ:IPGP) and Regeneron Pharmaceuticals Inc (NASDAQ:REGN) were among the weakest S&P 500 performers.