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Slowing job growth weighs on Wall Street; new stimulus eyed

Chuck Mikolajczak

By Chuck Mikolajczak

NEW YORK (Reuters) - Wall Street's main indexes fell on Friday as data showed a sharp slowdown in U.S. employment growth, and investors turned their attention toward the likelihood of another fiscal stimulus bill to buttress the economy from a pandemic-induced recession.

With the benchmark S&P 500 index now about 1.5% below its record high, defensive sectors including utilities <.SPLRCU> and real estate <.SPLRCR> were among the gainers. Tech-related <.SPLRCT> stocks, which have fueled a Wall Street rally since March, posted the biggest declines and helped push the Nasdaq down more than 1%.

Along the same line, value names, which have been unable to close the performance gap with growth stocks in recent years, advanced. The S&P 500 value index <.IVX> rose 0.60% while the S&P 500 growth index <.IGX> lost 0.99%.

The U.S. Labor Department's closely watched report showed nonfarm payrolls increased 1.76 million in July, much lower than the record 4.8 million in June.

However, the figure still topped economists' expectations and analysts said it could take the pressure off Congress to agree on a relief bill after weeks of wrangling. Differences have partly centered around continuing an extra $600-per-week in unemployment benefits.

"A big miss, a big disappointment, or a very large exceeding expectations would have hardened positions (in Congress) and would have increased the divide," said Michael Arone, chief investment strategist at State Street Global Advisors in Boston.

"In terms of fiscal policy, the fact the number came in a little better than expected, fairly close to consensus, it puts fiscal policy on a similar path so that neither side is going to be able to dig in here and say 'the bill is too big,' or 'we need to do that much more.'"

Democrats in Congress said on Friday they had offered to reduce a proposed coronavirus aid package by a trillion dollars if Republicans would add a trillion to their counter-offer, but Treasury Secretary Steven Mnuchin, one of the White House negotiators, called the proposal a "non-starter."

The Dow Jones Industrial Average <.DJI> fell 75.26 points, or 0.27%, to 27,311.72, the S&P 500 <.SPX> lost 12.31 points, or 0.37%, to 3,336.85 and the Nasdaq Composite <.IXIC> dropped 139.64 points, or 1.26%, to 10,968.43.

The declines put the Nasdaq on track to snap a seven-session streak of gains, with the Dow and S&P poised to snap five-session win streaks. Each of the three major averages were on pace for weekly gains.

With the second-quarter corporate earnings season largely over, about 82% of S&P 500 companies that have reported so far have beaten dramatically lowered estimates, with earnings on average coming in 22.5% above expectations, the highest on record.

T-Mobile US Inc <TMUS.O> jumped 5.80% as it added more-than-expected monthly phone subscribers and said it had overtaken rival AT&T Inc <T.N> as the second-largest U.S. wireless provider. The stock was the biggest gainer on the S&P communication services index <.SPLRCL>.

Uber <UBER.N> fell 5.92% as demand for its ride-hailing trips only marginally recovered from pandemic rock-bottom in the second quarter, even as its food-delivery segment saw double the orders.

Meanwhile, President Donald Trump late on Thursday unveiled sweeping bans on U.S. transactions with the Chinese owners of messaging app WeChat and video-sharing app TikTok. In response, China said the companies complied with U.S. laws and warned Washington would have to "bear the consequences" of its action.

New York-listed Tencent Music Entertainment Group <TME.N>, which was spun off from WeChat-owner Tencent Holdings Ltd <0700.HK> in 2018, fell 4.38%, while Facebook Inc <FB.O> jumped 1.80%.

Microsoft Corp <MSFT.O>, which is seeking to buy TikTok's U.S. operations, was down 2.14% %. U.S.-listed Chinese stocks such as Baidu Inc <BIDU.O>, Alibaba Group Holding <BABA.N> and JD.com Inc <JD.O> also declined.

Advancing issues outnumbered declining ones on the NYSE by a 1.13-to-1 ratio; on Nasdaq, a 1.07-to-1 ratio favored advancers.

The S&P 500 posted 33 new 52-week highs and no new lows; the Nasdaq Composite recorded 111 new highs and seven new lows.


(Additonal reporting by Herbert Lash; Editing by Tom Brown)