Jobs halt Wall Street rally, investors eye earnings

NEW YORK (Reuters) - Stocks fell on Friday as a weak jobs report dashed optimism that the economy was emerging from a soft patch, leaving investors to hope earnings season would revive an appetite for buying.

The sell-off was broad and halted an eight-day streak for the Nasdaq, though stocks ended off their lows. U.S. employers added only 18,000 workers in June, short of even the lowest forecast, jolting buyers who had rushed into the market after some encouraging labor-market figures earlier in the week.

Despite the day's drop, the three major U.S. stock indexes ended higher for the week. The market is coming off a string of gains that reflected increased hope for an economic rebound and a strong earnings season.

"If you're going to get concerned about the jobs report, you should wait for earnings before going through a complete manic swoon," said Phil Dow, director of equity strategy at Minneapolis-based RBC Wealth Management, which oversees $164 billion.

"Our guess is that we'll see better-than-expected earnings and revenue, and combined with the valuation of the market, this is a compelling time to get in."

The S&P 500 components are expected to show earnings growth of an average of 7.3 percent in the second quarter, but estimates have been lowered in the last 30 days.

The Dow Jones industrial average .DJI slipped 62.29 points, or 0.49 percent, to 12,657.20 at the close. The Standard & Poor's 500 Index .SPX shed 9.42 points, or 0.70 percent, to 1,343.80. The Nasdaq Composite Index .IXIC dropped 12.85 points, or 0.45 percent, to 2,859.81.

For the week, though, all three major U.S. stock indexes rose: The Dow advanced 0.6 percent, while the S&P 500 rose 0.3 percent and the Nasdaq gained 1.6 percent.

Alcoa Inc (AA.N) is scheduled to report results on Monday as earnings begins. Among other companies on tap to report next week are JPMorgan Chase & Co (JPM.N), Citigroup Inc (C.N) and Google Inc (GOOG.O). Shares of Google slumped 2.7 percent to $531.99 after Morgan Stanley downgraded the Internet giant to "equal-weight," citing margin concerns.

The CBOE Volatility Index .VIX or VIX, widely seen as a measure of anxiety on Wall Street, finished the session unchanged at 15.95. The VIX is down 30 percent from a high reached on June 16.

"This reflects a lack of investor anxiety," said Natalie Trunow, chief investment officer of equities at Calvert Investment Management in Bethesda, Maryland, which manages about $14.8 billion. "Even though the data suggests a soft patch, investors don't see big clouds on the horizon that would prompt them to hedge their positions in a major way."

Shares of Monster Worldwide (MWW.N), an online employment agency, sank 3.2 percent to $14.65 on the jobs report. Monster's stock was the biggest percentage loser in the Dow Jones U.S. business training and employment index .DJUSBE, which dropped 3.9 percent.

Banking stocks also fell, with the S&P's financial index .GSPF fell 1.3 percent, pressured by Bank of America (BAC.N), which shed 2 percent to $10.70 as the most actively traded stock on the New York Stock Exchange.

President Barack Obama cited the gloomy jobs report as one more reason lawmakers must strike a deal soon to raise the U.S. debt limit, saying the impasse was fueling uncertainty within financial markets and in the business sector.

On the upside, Merck & Co (MRK.N) rose 1.1 percent to $36.12 and was the Dow's top gainer.

Volume was extremely light, with about 5.95 billion shares traded on the New York Stock Exchange, the American Stock Exchange and Nasdaq, well below last year's daily average of 8.47 billion.

More than two stocks fell for every one that rose on both the New York Stock Exchange and the Nasdaq.

(Reporting by Ryan Vlastelica; Editing by Jan Paschal)