Jobs selloff erases Wall Street's gains for week

NEW YORK Fri Jul 6, 2012 4:42pm EDT

Traders John Bowers (L) and Scott Gueli work on the floor of the New York Stock Exchange, July 6, 2012. REUTERS/Brendan McDermid

Traders John Bowers (L) and Scott Gueli work on the floor of the New York Stock Exchange, July 6, 2012.

Credit: Reuters/Brendan McDermid

NEW YORK (Reuters) - Stocks fell about 1 percent on Friday as another month of tepid jobs growth underlined fears the economy was stalling, though not to the point where more economic stimulus from the Federal Reserve was imminent.

Friday's losses meant the S&P 500 index ended the week 0.6 percent lower, with technology .GSPT and industrial shares .GSPI the day's biggest losers. Tech was hit by weak outlooks in the software sector, which dragged lower Dow component Hewlett Packard (HPQ.N) 3.5 percent to $19.57.

The tech sector fell 1.8 percent while industrials were off 1.3 percent. Both groups often trade in line with expectations for the economy.

About 80,000 non-farm payroll jobs were added in June, the third straight month employment grew by less than 100,000 jobs.

But many investors said the weaker-than-expected figure was not enough to spur the Fed to undertake a third round of quantitative easing to stimulate growth.

"This isn't disappointing enough for QE3, but it suggests an extended period of sluggish growth and limited improvement on the jobs front," said Eric Teal, who helps oversee $4.5 billion as chief investment officer at First Citizens Bancshares Inc in Raleigh, North Carolina.

Teal added that he didn't want to use the decline to add to positions, as "we'll have more opportunities in July and August as international markets continue to be weak."

A Reuters poll of Wall Street economists put the chances of QE3 at 65 percent, but just eight of 15 primary dealers in government securities see it happening in August or September.

Though Fed action might cheer some investors, many doubt the ability of central banks to lift the economic gloom. More than two-thirds of companies traded on both the New York Stock Exchange and Nasdaq fell.

The payroll report followed other data this week that U.S. manufacturing shrank in June and service sector growth slowed to its lowest level since January 2010, which spurred speculation the Fed may take more action to stimulate the economy.

The Dow Jones industrial average .DJI was down 124.20 points, or 0.96 percent, at 12,772.47. The Standard & Poor's 500 Index .SPX was down 12.90 points, or 0.94 percent, at 1,354.68. The Nasdaq Composite Index .IXIC was down 38.79 points, or 1.30 percent, at 2,937.33.

All 10 S&P sectors fell, but defensives areas like consumer staples .GSPS and utilities .GSPU were down the least.

The S&P 500 fell 0.6 for the week while the Dow fell 0.8 percent. The Nasdaq rose for a fifth straight week, but this week's gain was less than 0.1 percent.

German markets regulator BaFin is conducting a special probe of Deutsche Bank (DBKGn.DE) (DB.N) as part of a wider investigation into possible manipulation of the London Inter Bank Offered Rate (Libor), Reuters reported, citing two people familiar with the matter. The bank's U.S.-traded shares lost 4.8 percent to $33.74.

Spanish government bonds rose to levels seen as unsustainable a day after the European Central Bank cut rates to a record low, and China and Britain also loosened monetary policy. <GVD/EUR>

Shares of Informatica Corp (INFA.O) plunged 28 percent to $31.39 after the data-integration software maker forecast a weak second quarter hurt by delayed contracts.

Networking shares took a hit after gear maker Acme Packet Inc APKT.O forecast second-quarter results below expectations on continued weakness in the North American telecom service provider market.

The Arca Networking index .NWX lost 3.5 percent, while Acme Packet tumbled 14.5 percent to $15.74.

The weak outlooks hit other tech shares. Teradata Corp (TDC.N) was the S&P's biggest percentage decliner, off 10.5 percent at $65.01, followed by Citrix Systems (CTXS.O), down 7.6 percent at $77.45.

Skyrocketing sales of the Galaxy smartphone drove a record quarterly profit of $5.9 billion at Samsung Electronics (005930.KS). This is likely to stretch the firm's lead over rivals Apple (AAPL.O) and Nokia (NOK1V.HE).

Apple shares were off 0.7 percent at $605.88 while U.S.-listed shares of Nokia fell 5 percent to $1.92.

Volume was among the lightest of the year, with about 4.96 billion shares traded on the New York Stock Exchange, the American Stock Exchange and Nasdaq, below last year's daily average of 7.84 billion.

(Editing by Kenneth Barry)

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