The Labor Department reported that the United States economy added more jobs than expected last month, easing investors’ fears that the country was slipping into recession. But Fitch Ratings downgraded the government debt of Spain and Italy, sending the stock market and the euro marginally lower in afternoon trading.
The Standard Poor’s 500-stock index closed down 9.51 points, or 0.8 percent, at 1,155.46, while the Dow Jones industrial average fell 20.21 points, or 0.2 percent, to 11,103.12. The Nasdaq composite index lost 27.47 points, or 1.1 percent, to close at 2,479.35. Yields on the benchmark 10-year United States Treasury note rose to 2.08 percent from 1.99 percent late Thursday. The price fell 24/32, to 101 14/32.
The S. P. index finished the week up 2.1 percent, buoyed by an astonishing late-day rally on Tuesday as well as strong sessions on Wednesday and Thursday. It recovered from steep losses earlier in the week, when it briefly traded in bear market territory, defined as a 20 percent drop from its previous peak. The Dow Jones index gained 1.7 percent for the week, while the Nasdaq rose 2.6 percent.
Third-quarter earnings will be a major factor in whether markets hold onto their gains, said Rebecca Patterson, chief markets strategist at J. P. Morgan Asset Management. Companies will begin to report next week, and analysts’ forecasts vary widely. That is a reflection of the uncertainty in the global economy, she said.
“The earnings season is kind of a wild card,” Ms. Patterson said.
The Labor Department said that American employers added 103,000 jobs in September, while the unemployment rate remained at 9.1 percent. Some investors pointed to gains in average hourly earnings and an increase in the hiring of temporary workers as signs in the report of an improving outlook in the labor market.
Still, economists cautioned that the numbers were weak and said the report seemed positive only in light of low expectations.
The jobs report shows an economy that is “neither reaccelerating nor shifting into recession,” wrote Steve Blitz, senior economist for ITG Investment Research, in a report to investors. He said the American economy remained vulnerable because of its reliance on exports.
“The employment data in the coming months should be more of the same, which isn’t much, and if growth starts to decelerate more rapidly around the world, negative jobs numbers are more likely than not,” he wrote.
The jobs report, coupled with somewhat optimistic reports on retail sales and auto sales for September, quelled fears of an immediate recession, said David Kelly, chief market strategist for JPMorgan Funds, but traders were probably cashing in on gains from earlier in the week.
“With this dollop of good news, it’s natural for people to take money off the table,” he said. “But when you’re investing, rather than trading, you do need to look at the fundamentals. The fundamentals do justify both higher interest rates and higher stock prices than prevail today.”
Fitch downgraded its rating on Italian debt one level after similar moves by the other major rating agencies in recent weeks. It cut its rating on Spain two levels. In both cases, the agency cited concerns about debt coupled with low growth. The outlook on both countries was negative.
The move weighed on Wall Street, particularly banks, whose exposure to the debt crisis in Europe is unclear. Shares for Bank of America dropped 6.1 percent, JPMorgan Chase shares slipped 5.2 percent and Citigroup shares dropped 5.3 percent.
The euro also fell after Fitch’s action, to $1.3384, from $1.3449.
Marc Chandler, an analyst at Brown Brothers Harriman, said investors would continue to put more weight on the situation in Europe than on the domestic economy. “The U.S. is not the cross hairs,” he said. “Europe is.”
European markets, which closed before the downgrades, were moderately higher.
Article source: http://feeds.nytimes.com/click.phdo?i=2416c3dcf324b373b007cc40723eadc1