US stocks sag as good jobs data clouds Fed outlook

NEW YORK: Wall Street stocks retreated from record levels early Friday after a better-than-expected US jobs report was seen as lessening the chances of a Federal Reserve interest rate cut.

About 20 minutes into trading, the Dow Jones Industrial Average had dropped 0.5 percent to 26,844.88.

The broad-based S&P 500 also lost 0.5 percent to 2,979.51, along with the tech-rich Nasdaq Composite Index, which was at 8,125.99.

All three indices finished at records Wednesday ahead of the Independence Day holiday Thursday, in a shortened trading week that could see low volume and more volatility.

Analysts attributed the surge to a mixed economic data that appeared to boost the odds the Fed could cut interest rates this month, some said the picture had changed after the Labor Department reported Friday that the US added 224,000 new jobs in June, far above expectations.

FTN Financial's Chris Low said the data reduced the chances of a rate cut, saying "a cut at the end of this month seems unlikely unless there is significant weakness in consumer indicators."

But Jim O'Sullivan of High Frequency Economics said the data were unlikely to shift the Fed's course, given continued weakness in the global economy.

He said "the well-signaled easing reflects officials' worries about the potential drag on growth from trade-related 'uncertainties,' along with sub-2% inflation."

The reaction to the jobs data "goes to show some of the convoluted thinking of the market in recent days and weeks," said Briefing.com analyst Patrick O'Hare.

"That thinking incorporated a belief that bad economic news was good news because it would mean a more aggressive rate cut from the Federal Reserve. Today's report, though, was 'too good,' which makes it 'too bad' for a greedy market that wanted a bigger rate cut than it justifiably deserved."