Bond yields rose and stocks mostly bounced back from an early slide to finish with modest losses Friday, a downbeat end on Wall Street to an otherwise milestone-setting week for the broader market.
The small decline snapped a six-day winning streak for the S&P 500, though the benchmark index still notched a weekly gain. The S&P 500 set three straight all-time highs earlier in the week, extending the market's solid gains in June into July. The S&P is up 19.3% so far this year.
The S&P 500 fell 5.41 points, or 0.2%, to 2,990.41. The Dow Jones industrial average dropped 43.88 points, or 0.2%, to 26,922.12.
The Nasdaq composite slid 8.44 points, or 0.1%, to 8,161.79. The Russell 2000 index of smaller company stocks rose 3.50 points, or 0.2%, to 1,575.62.
Trading volume was light as U.S. markets reopened after the Independence Day holiday.
The major indexes headed lower from the get-go Friday, a tumble that briefly knocked 230 points off the Dow. Investors got rattled by government data showing an unexpected burst of hiring last month. That led traders to question whether the Federal Reserve will decide to lower interest rates later this month.
The Labor Department said employers added 224,000 jobs in June. The pickup in hiring could give the central bank pause later this month, when its policymakers are scheduled to meet and consider cutting the Fed's benchmark interest rate.
"What the markets are really trying to figure out now, relative to the Fed, is on a stronger [jobs] report the question becomes, will they cut rates?" said Darrell Cronk, chief investment officer for Wells Fargo Wealth and Investment Management. "When you get this kind of holiday-shortened weeks and light trading volume any kind of movement tends to be over-accentuated."
On Friday, the Fed emphasized that it would act as necessary to sustain the economic expansion, while noting that most Fed officials have lowered their expectations for the course of rates. The Fed's statement came in its semiannual report on monetary policy.
Traders were betting Friday that a rate cut in late July may be less likely now. Investors sold bonds, sending the yield in the 10-year Treasury note up to 2.04% from 1.95% late Wednesday, a big move. Bond yields have fallen through much of June as investors' expectations of a Fed rate cut increased.
The jump in yields helped boost financial stocks, which led the gainers. Higher bond yields push up interest rates that banks charge on mortgages and other loans. Jefferies Financial Group climbed 3.4% to lead all gainers in the S&P 500.
Homebuilders fell broadly as bond yields rose, setting the stage for higher mortgage rates that could put a crimp on sales. KB Home dropped 2.4%.
Health care, industrial, technology and consumer staples stocks accounted for much of the selling. Regeneron Pharmaceuticals fell 3.6%, Rockwell Automation dropped 2.9%, Nvidia slid 1.6% and Kellogg lost 1.6%.
Video game company Electronic Arts fell 4.5%, the biggest loser in the S&P 500.
A slight easing of trade tensions between the U.S. and China helped spur the market's gains earlier this week. Both nations have agreed to refrain from new tariffs while they open a new round of negotiations. The development relieved some pressure on the market, though the trade war still looms over global economic growth.
White House economic adviser Larry Kudlow told reporters Thursday that he expected to announce new negotiations soon. Still, forecasters warn the truce is fragile because the two sides still face the disputes that caused talks to break down in May.
Besides any developments on trade, the next major catalyst for the market will likely be the flood of earnings reports that companies are set to release in coming weeks as the second-quarter reporting season begins.
Expectations are generally low, and this could be the first time in three years that S&P 500 companies report a back-to-back decline in overall earnings, according to FactSet.
Major stock indexes in Europe also ended lower Friday, while energy futures prices closed broadly higher.
Business on 07/06/2019