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Jun 3, 2016

Wall Street at Close Report, by CNBC on June 3, 2016: Stocks Close Slightly Lower After Jobs Miss
Evelyn Cheng
U.S. stocks closed slightly lower Friday, as gains in utilities offset declines in financials after a sharp miss on the May jobs report.

The major averages held well off session lows in afternoon trade, with the Dow Jones industrial average trading about 20 points lower after earlier falling 148 points. Goldman Sachs contributed the most to declines.
"I do think sooner or later bad news does become bad news and the only reason why they're taking us back to 2,100 on the SPX is the odds of a July hike have dropped and the Fed's going to hold off," said John Caruso, senior market strategist at RJO Futures.

Traders also attributed some gains to short-covering. Utilities traded about 2 percent higher to lead S&P 500 advancers and the Dow Utilities hit a new all-time intraday high, while financials briefly fell more than 2 percent as the greatest laggard. The Bank and Regional Banking ETFs pared losses to trade about 2 percent lower.
"Positioning is still playing a big role. The positioning coming into the day was the economy's strong and the Fed will hike ... and today's action is just an unwind of that," said Ilya Feygin, managing director and senior strategist at WallachBeth Capital.
He also noted some support for the S&P 500 around 2,084/2,085 and the weaker U.S. dollar.
ISM non-manufacturing came in at 52.9 for May, well below April's 55.7 print. The employment component fell to 49.7 from 53.0 in April.

"That confirms there is a deceleration in the private sector, in the services sector that is more than manufacturing or mining and energy," said Gene Tannuzzo, senior portfolio manager at Columbia Threadneedle's Strategic Income Fund.
"The rally in risky assets we've seen is probably going to be temporary because a slowing U.S. economy is not good for risk," said Lee Ferridge, head of macro strategy, North America, at State Street Global Markets.

The May jobs report showed creation of 38,000 jobs, well below expectations. Analysts noted the Verizon workers' strike likely made the number lower than it would have been.

"However, even if we adjust (for the strike) it's still a very weak report," said Tim Hopper, chief economist at TIAA Global Asset Management, noting the three-month trend remained positive and the number of headlines jobs created should decline as the economy moves toward full employment.
"We believe the Fed is ready to hike and they want to hike. I don't see anything in the numbers today that would suggest they wouldn't hike," Hopper said.
Read MoreJuly hike still possible
Fed funds futures showed markets were pricing in an 8 percent chance of a June rate hike, and 33 percent in July, according to RBS. Chances for a September hike were 54 percent, and 90 percent in December, with the first full rate hike now factored in for March 2017, RBS said.
"I think some of the slowdown on the jobs growth reflects the slow growth we saw in the first quarter and the fourth quarter," said Kate Warne, investment strategist at Edward Jones.

The major U.S. averages came off session lows in late-morning trade, led by gains in utilities.

"I think this employment number was a fluke and an aberration," said Peter Cardillo, chief market economist at First Standard Financial. "I don't think it points to a real slowdown. Investors are beginning to have second thoughts about it."
In other economic news, factory orders rose 1.9 percent in April.

The final Markit services PMI was 51.3 in May, down from 52.8 in April and well below the post-crisis average of 55.6, Markit said.
Treasury yields were lower, with the 2-year yield near 0.77 percent and the 10-year yield around 1.70 percent as of 3:48 p.m. ET.
The U.S. dollar index traded more than 1.5 percent lower, with the euro around $1.135 and the yen around 106.6 yen against the greenback.
U.S. crude oil futures settled down 55 cents, or 1.12 percent, at $48.62 a barrel. The U.S. rig count rose for the first time in 11 weeks.
Fed Governor Lael Brainard, a voting member of the FOMC, said risk-management suggests waiting to raise rates and she wants to see more data before a rate hike.

There could be two rate hikes in 2016 if data continue to be favorable but the timing of both won't prove to be crucial, Chicago Fed President Charles Evans told CNBC earlier. He also said the June 23 U.K. vote on whether to leave the European Union is "a very critical decision."
Fed Chair Janet Yellen is due to speak midday Monday ahead of the central bank's meeting scheduled for June 14 and 15.
"I think that the key thing to watch (is) what Janet Yellen says over the next couple of weeks," said Scott Brown, chief economist at Raymond James.

"It's really the economic numbers that are going to matter more than anything," he said. "If we were to see a jobs rebound in the next few months they could raise rates but my sense is things are very mixed out there."


DJIA Dow Industrials 17807.13
-31.43 -0.18%
S&P 500 S&P 500 Index 2099.13
-6.13 -0.29%
-28.85 -0.58%

Markit's Caixin China General Services Business Activity Index fell to 51.2 in May, from 51.8 in the previous month.
Read More Early movers: GPS, AVGO, AMBA, AVP, CC, TM, CST, FB, BP, AVH & more

In afternoon trade, the Dow Jones industrial average declined 52 points, or 0.29 percent, to 17,785, with Goldman Sachs leading decliners and Caterpillar the top advancer.
The S&P 500 fell 9 points, or 0.43 percent, to 2,096, with financials leading six sectors lower and utilities the top advancer.
The Nasdaq composite fell 36 points, or 0.73 percent, to 4,935.
The CBOE Volatility Index (VIX), widely considered the best gauge of fear in the market, traded higher near 13.7.
Decliners were a step ahead of advancers on the New York Stock Exchange, with an exchange volume of 516 million and a composite volume of 2.3 billion in afternoon trade.
U.S. crude oil futures for July delivery declined 78 cents to $48.39 a barrel on the New York Mercantile Exchange.
Gold futures for August delivery settled 30.30 higher at $1,249.90 an ounce.
Correction: This story has been revised to reflect the factory orders report was for April.