By Dan Strumpf
A solid U.S. jobs report for July pushed the Dow to its lowest
close since February, as investors geared up for an increase in
interest rates as soon as September.
U.S. employers added 215,000 jobs in July, the Labor Department
said Friday. The unemployment rate, in a separate survey, was
steady at 5.3%. Both figures were in line with economists'
expectations.
Investors have been scouring economic data, including Friday's
jobs report, for guidance on the timing of the first increase in
U.S. short-term rates in nearly a decade. Fed officials last month
said they were looking for further improvement in the labor market
before making such a move.
The Fed has signaled that its eventual increases in interest
rates would be gradual. Still, uncertainty remains over how the
market will adjust to slightly higher rates, as the central bank's
low-rate policy has helped fuel the six-year bull market in stocks
that has lasted since the financial crisis.
The Dow Jones Industrial Average fell for the seventh straight
session in a row--its longest losing streak since August
2011--declining 46.37 points, or 0.3%, to 17373.38. That marks the
lowest close for the blue chips since early February. The Dow is
now down 2.5% for the year.
The S&P 500 fell 5.99, or 0.3%, to 2077.57, and the Nasdaq
Composite declined 12.90, or 0.3%, to 5043.54. Both remain in
positive territory for the year.
The energy sector suffered the day's biggest losses, losing
ground as oil prices fell more than 1%. Energy stocks in the
S&P 500 shed 1.9%.
Investors "are definitely going, 'OK, this is happening,'" said
Tom Carter, managing director at brokerage firm JonesTrading.
"People are positioning" for a rise in interest rates.
The odds of a rate increase--based on trading in federal-funds
futures--at the September meeting were 56% Friday, compared with
46% before the jobs report and 48% Thursday, according to traders.
Federal-funds futures are used by investors and traders to place
bets on central-bank policy.
The odds of a rate boost at the December meeting were 79%,
compared with 72% before the report and 73% on Thursday.
The July jobs report "without a doubt" shows the further
improvement that the Fed was looking for in the labor market, said
Jim Dunigan, chief investment officer at PNC Wealth Management,
paving the way for a September rate increase.
But until the Fed actually makes a move, stocks are likely to
remain rangebound, Mr. Dunigan said. He added that a rate increase
would be positive for stocks, because it would reaffirm economic
growth in the U.S. that should lead to higher corporate
earnings.
Friday's decline closes out a downbeat week for U.S. stocks. The
S&P 500 lost 1.3% this week following a tumble on Thursday that
battered major media companies. Shares of Viacom Inc. have lost
more than 20% this week after a disappointing earnings report
Thursday.
Walt Disney stock is down nearly 8.9% on the week.
The recent declines have left the S&P 500 with a gain of
just 0.9% for the year, after rising as much as 3.5% as recently as
May. Major indexes have had trouble sustaining gains in 2015 in the
face of an uneven U.S. economy, financial tumult in Europe, a
slowdown in once-booming China and the prospect of rate
increases.
The yield on the 10-year Treasury note fell to 2.173% compared
with 2.22% before the jobs data release. Bond yields rise as prices
fall.
Stocks remained lower in Europe. Germany's DAX lost 0.8%, while
France's CAC 40 lost 0.7%, and the Stoxx Europe 600 index shed
0.9%.
In Asia, Japan's Nikkei Stock Average added 0.3%, while Hong
Kong's Hang Seng Index rose 0.7%.
In commodity markets, gold futures added 0.4% to $1094.10 an
ounce. Crude-oil futures declined 1.8% to $43.87 a barrel, its
lowest level since March.
Write to Dan Strumpf at daniel.strumpf@wsj.com