NEW YORK Global stocks and crude oil retreated on Friday even after a U.S. employment report for October surpassed expectations, as investors looked beyond next week's presidential election to the looming "fiscal cliff."
The dollar climbed to a more-than-six-month peak against the yen and a three-week high versus the euro after U.S. employers stepped up hiring and the unemployment rate ticked higher as more workers renewed job hunts, a hopeful sign for the economy.
But other data highlighted a mixed picture. Demand for U.S. factory goods rose in September by the most in over a year, but a gauge of business investment plans showed lackluster momentum in the recovery despite a slight upward revision.
"The (jobs) report itself was good but just not good enough, especially after the pre-rally we had yesterday," said Todd Schoenberger, managing principal at the BlackBay Group in New York, referring to the 1.1 percent surge in the broad-based S&P 500 index on Thursday, its best gain since September 13.
The employment data was the last major report card on the U.S. economy before Tuesday's presidential election. Polls show President Obama and Republican Mitt Romney locked in a dead heat in a race that may hinge on the nation's feeble jobs market.
"With the election next week and the outcome of that still so uncertain, some modest downward pressure is to be expected for the rest of the day," Schoenberger said.
Much of Thursday's rally was rooted in the belief that significant East Coast storm damage will force capital spending, rebuilding and help boost employment far more quickly than was thought a week ago, Andrew Wilkinson, chief economic strategist at Miller Tabak & Co, told clients.
But Wilkinson said the so-called fiscal cliff -- when higher tax rates and cuts in government spending are scheduled to kick in early next year if Congress fails to act -- has made investors reluctant to buy further into the equity rally.
The Dow Jones industrial average .DJI was down 115.92 points, or 0.88 percent, at 13,116.70. The Standard & Poor's 500 Index .SPX was down 9.98 points, or 0.70 percent, at 1,417.61. The Nasdaq Composite Index .IXIC was down 25.87 points, or 0.86 percent, at 2,994.19.
In Europe, the FTSEurofirst 300 index of top European shares .FTEU3 closed up 0.5 percent at 1,115.19.
The MSCI all-country equity index of world shares .MIWD00000PUS slipped 0.27 percent to 330.90.
Oil fell as weak European data reinforced a gloomy picture for the demand outlook. Euro zone manufacturing shrank for the 15th month running in October as output and new orders fell, a survey showed.
Weak growth, high prices and better vehicle fuel efficiency pushed down fuel consumption in most of Western Europe over the summer, official statistics showed.
Also, the auto market in western European maintained a sharp descent toward levels last seen nearly 20 years ago as consumers worried about unemployment and euro zone austerity affected car dealerships in October.
Brent crude for December fell $1.75 to $106.42 a barrel, while U.S. crude for December delivery fell #2.23 to settle at $84.86.
The U.S. dollar index .DXY was up 0.65 percent at 80.567, and the euro was down 0.80 percent at $1.2838.
The data were viewed as positive for the economy, but not strong enough to jeopardize the Federal Reserve's accommodative monetary stance.
"Incomes aren't really growing, and if incomes don't grow, how can spending grow?" said Wilmer Stith, vice president and portfolio manager of the Wilmington Broad Market Bond Fund in Baltimore. "By no means is the economy out of the woods."
The benchmark 10-year U.S. Treasury note pared losses to trade up 1/32 in price, with its yield at 1.726 percent.
(Additional reporting by Marc Jones in London; Doris Frankel in Chicago; Ryan Vlastelica, Gertrude Chavez-Dreyfuss and Ellen Freilich in New York; Reporting by Herbert Lash; Editing by Chizu Nomiyama)