Investing.com – Wall Street traded lower after worrisome data on the labor market and services sector convinced investors to sell stocks and the dollar, while markets slashed odds on a rate hike by the Federal Reserve (Fed).
At 16:28GMT or 12:28ET, the Dow 30 lost 38 points, or 0.21%, the S&P 500 fell 9 points, or 0.40%, while the tech-heavy NASDAQ Composite traded down 26 points, or 0.58%.
The May employment report showed the creation of just 38,000 non-farm payrolls, far below consensus expectations for 164,000.
U.S. futures sold off after the release and the dollar tumbled.
The dismal jobs report was followed by the weakest ISM non-manufacturing purchasing managers’ index (PMI) since February 2014.
Markets slashed odds for a Fed rate hike and, as the dust settled near midday stateside, Fed fund futures had placed the probability for a June increase at only 6%, compared to 21% the previous day, while odds were down from 58% in July to only 37%.
Indeed, the probability for tightening of monetary policy no longer crosses the 50% threshold until the November 2 meeting where it settled at 52%.
There was however still some question as to whether the worse-than-expected data would really dissuade the Fed from returning to policy normalization.
The May employment data could be an anomaly based on a telecommunications strike and a drop in construction hiring possibly due to bad weather.
All in all, the data only sought to increase the importance of Fed chair Janet Yellen’s next public appearance on Monday.
The Fed chief is set to give a speech on the economic outlook and monetary policy to the World Affairs Council of Philadelphia on Monday at 16:30GMT, or 12:30ET, and it could be the final chance for her to signal her position on the future path of rate hikes before the Fed announces their decision on June 15.
Before the jobs report, Chicago Fed president Charles Evans indicated on Friday that two rate hikes this year would be reasonable if economic data continues to be favorable. However, Evans did say he saw a "reasonable case" for delaying higher borrowing costs until core inflation reaches the Fed's goal of 2%.
Fed governor Lael Brainard was the first policy maker to speak after the employment data and warned that global risks warranted caution on returning to the path of policy normalization.
"Prudent risk-management would suggest the risks from waiting until the totality of the data provides greater confidence in a rebound in domestic activity, and there is greater certainty regarding the “Brexit” vote, seem lower than the risks associated with moving ahead of these developments," Brainard said.
In company news, Citigroup Inc (NYSE:C) tumbled more than 3% after chief executive Mike Corbat warned that second quarter net profit will be roughly in line with the first three months of the year, 25% below the levels for the same period in 2015.
Avianca Hldgs (NYSE:AVH) soared more than 20% as United Continental Holdings Inc (NYSE:UAL) and Delta Air Lines Inc (NYSE:DAL) were named as possible suitors in a Wall Street Journal report that the Panama-based air carrier could be sold.
Gap Inc (NYSE:GPS) rose almost 5% after reporting a 6% decline in May comparable sales, beating expectations for 7.2% decrease.
Broadcom Ltd (NASDAQ:AVGO) gained more than 5% after quarterly earnings per share beat consensus.
Alibaba Group Holdings Ltd (NYSE:BABA) sank more than 1% after Softbank Corp. (T:9984) announced it was selling $1.1 billion of the Chinese giant.
Meanwhile, U.S. crude futures declined 0.53% to $48.91 by 16:33GMT, or 12:33ET, while Brent oil traded down 0.38% to $49.85.