Stocks were sent on a bit of a roller-coaster ride Friday. The Dow Jones industrial… (Spencer Platt, Getty Images )
NEW YORK — The government's disappointing jobs report disheartened investors about the pace of the global economic recovery, and short-circuited a rally that pushed stocks up more than 10% during the first three months of the year.
Investors fled stocks Friday after the Labor Department reported that the U.S. added a mere 88,000 jobs in March. That number was well below the 190,000 jobs that analysts were expecting, and renewed fears that the labor market might be stalling.
Wall Street had been growing more upbeat in recent weeks that the economy was steadily improving and sent major stock market indexes to record highs. However, investors were left unsettled this week after the jobs report capped a week of lackluster reports on manufacturing and the labor market.
"This was definitely much worse than we expected," said Marc Doss, regional chief investment officer for Wells Fargo Private Bank. "It does call into question, a little bit, the sustainability of this recovery."
Stocks were sent on a bit of a roller-coaster ride Friday. The Dow Jones industrial average was down nearly 172 points early in the session, but some investors took advantage of the steep drop to cherry-pick stocks. The blue-chip index closed down 40.86 points, or 0.3%, at 14,565.25.
The broader Standard & Poor's 500 index lost 6.70 points, or 0.4%, to 1,553.28. The Nasdaq composite index dropped 21.12 points, or 0.7%, to 3,203.86.
The Dow finished down 0.1% for the week, the S&P 500 was off 1% and the Nasdaq was 2% lower.
Some market observers have been predicting that this year's market rally could cool off at some point, potentially as soon as the second quarter. A spring swoon has been a trend during the last few years, they said.
"It's not that bad — it's just a little pullback," Doss said. "This could be the start of a correction — we won't know for a few days."
The lackluster jobs report might actually turn out to be a blessing in disguise.
Quincy Krosby, market strategist at Prudential Financial, said the jobs data might help persuade the Federal Reserve to continue its aggressive bond-buying program aimed at boosting the economy. Policymakers are currently pumping about $85 billion a month into the economy with the intent to push down interest rates and stimulate borrowing.
The program has the added bonus of making stocks look more attractive because investors aren't making as much money off safer investments such as Treasury bonds. Analysts have been looking to the Fed for any hint that they might begin to turn off its money spigot.
"If the data continue to be this weak, the Fed obviously is not going to change course," Krosby said. The Fed "could conceivably feel that it has to do more for growth."
The Labor Department's monthly jobs report has become investors' most watched gauge of whether the economy is recovering or running out of steam.
But next week investors will keep a close eye on the initial batch of first-quarter financial reports from U.S. companies.
Alcoa Inc. becomes the first major company to report results Monday. Others on tap to report next week include JPMorgan Chase & Co., the country's largest bank by assets.
Key will be signs of revenue growth, a measure of demand in the U.S., Europe and Asia.
Analysts expect the average company in the S&P 500 to report a meager 0.58% growth in quarterly earnings, according to S&P Capital IQ. Still, analysts expect average per-share earnings to hit a record this year, at $111.09 a share.
"The earnings are crucial," Krosby said.