NEW YORK (AFP) - Wall Street stocks retreated from records and lost ground on Friday (July 5) after a better-than-expected US jobs report was seen as lessening the chances of a hoped-for Federal Reserve interest rate cut.
The US added 224,000 new jobs in June, far above expectations, and futures markets shifted after the government report betting that the Fed would still cut interest rates on July 31, but by a smaller amount.
The Dow Jones Industrial Average ended the holiday-shortened week at 26,922.12, down 0.2 per cent compared to Wednesday's close.
But analysts said the session should be taken with a grain of salt because of low trading volumes after the Independence Day holiday Thursday.
The broad-based S&P 500 also shed 0.2 per cent to finish at 2,990.41, while the tech-rich Nasdaq Composite Index slipped 0.1 per cent at 8,161.79.
All three major indices rallied to records Wednesday following a trove of mediocre economic data that bolstered anxiety about a slowing economy and seemingly lift the odds of a Fed interest rate cut.
Gorilla Trades strategist Ken Berman said Friday's US jobs data had weakened that argument, especially compared with poor German economic data.
"Since German factory orders were nothing short of disastrous, the divergence between the domestic economy and the rest of the world is well and alive," Berman said in a note.
"That means that the Fed will have a hard time justifying an outright rate cut this month, so volatility could increase in the coming weeks. Stay tuned."
But Karl Haeling of LBBW said investors still believe the US central bank will cut based on statements from Fed Chair Jerome Powell and other officials.
Investors "think the Fed would still do what it takes to keep the economy growing," he said.
Banks outperformed the broader market, with Goldman Sachs, JPMorgan Chase and Bank of America all finishing with gains on the shifting expectations over Fed action.
But pharmaceutical shares such as Dow members Merck and Pfizer shed more than 1 per cent after President Donald Trump said his administration was developing a programme that would reduce drug prices.