* U.S. job growth surges, wage growth remains tepid
* Rate-sensitive bank stocks gain
* Dow down 0.16%, S&P 500 down 0.18%, Nasdaq down 0.10%
(Updates to market close)
By Chuck Mikolajczak
July 5 (Reuters) - U.S. stocks dipped on Friday, as the S&P
500 snapped a three-day streak of record closes, following an
unexpectedly strong U.S. payrolls report that led investors to
reassess how dovish a stance the Federal Reserve may take at its
next meeting.
The U.S. Labor Department data showed nonfarm payrolls rose
by 224,000 jobs in June, the most in five months, and solidly
beating economists' expectation of 160,000 additions. Traders sharply scaled back their expectations of a rate cut
of half a percentage point by the central bank at its next
policy meeting on July 30-31, although confidence remained high
the Fed would cut rates by 25 basis points. Stocks slumped in May as trade talks between the United
States and China were at a standstill and economic data began to
point to a slowing. However, equities have rallied since June as
the Fed and other global central banks signaled they were
becoming more dovish.
"The last, best hope of the bulls in a market like this is
you get some sort of cutting from the Fed," said
Tobias Carlisle, founder and portfolio manager at Acquirers
Funds in Los Angeles.
"So they seem to be watching the Fed really closely, and the
Fed is watching the market too."
The Dow Jones Industrial Average .DJI fell 43.88 points,
or 0.16%, to 26,922.12, the S&P 500 .SPX lost 5.41 points, or
0.18%, to 2,990.41 and the Nasdaq Composite .IXIC dropped 8.44
points, or 0.1%, to 8,161.79.
FOR THE WEEK.
The jobs report also pointed to slowing wage growth and
mounting evidence that the economy was losing momentum, which
could still give the Fed enough of a cushion to cut rates at the
end of the month.
The Fed, in its semiannual report to Congress, repeated its
pledge to "act as appropriate" to sustain the economic
expansion, and said while U.S. economic growth continued "at a
solid pace" in the first half of the year, it likely weakened in
recent months as higher tariffs weighed. Shares of banks .SPXBK , which have been under pressure
from falling benchmark debt yields in recent weeks, rose 0.73%
and helped drive a 0.38% gain in financials .SPSY , one of the
few bright spots among S&P sectors.
The defensive names such as real estate .SPLRCR , utilities
.SPLRCU and consumer staples .SPLRCS - each lost ground as a
rise in U.S. Treasury yields served to make the dividend-paying
companies less attractive.
Trading volumes were light at the end of a holiday-shortened
week as markets were shut on Thursday for the Independence Day
holiday. About 5.08 billion shares changed hands in U.S.
exchanges, compared with the 6.8 billion-share daily average
over the last 20 sessions, the lowest volume day of the year for
a full trading session.
Declining issues outnumbered advancing ones on the NYSE by a
1.18-to-1 ratio; on Nasdaq, a 1.15-to-1 ratio favored advancers.
The S&P 500 posted 37 new 52-week highs and no new lows; the
Nasdaq Composite recorded 67 new highs and 42 new lows.
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