Oct. 02--Stocks recovered Friday morning after taking a steep tumble on jobs data that came in weaker than expected, sparking unease about the health of the U.S. economy and even more uncertainty about the Federal Reserve's expressed preference for raising interest rates this year.
The blue-chip Dow Jones Industrial Average dropped more than 200 points, or more than 1.5%, before moderating its losses at 76.87, or about 0.5%, at 16,1900.00 in midday trading. The broader Standard Poor's 500 was down 11.19, or 0.5%, to 1912.63 at midday. The U.S. markets followed European markets, which were also down moderately in Friday's trading.
The Commerce Department's jobs report, which came in at 142,000, significantly below economists' expectations of 200,000, threw another wrinkle into the Fed's long-running deliberations about when to raise short term interest rates, which many analysts believe would be seen by markets as a vote of confidence in the U.S. economy.
In September, Fed Chair Janet Yellen gave a major speech making the case for a rate hike this year, "unless the economy surprises us." Fed officials have insisted that any decision will be "data dependent," with the labor market given special scrutiny for signs of wage inflation.
Even a moderately strong jobs report would have been seen by markets as giving the Fed a green light to proceed with what has become known as "lift off" at its next meeting in October, or, more likely, December. The downside surprise on jobs now raises the odds that a rate hike would be pushed into next year.
Markets were battered August as wild drops on China's main stock market deepened questions the health of that country's economy and about its spillover effects on world trade. Markets have also been rattled by steep dives in the prices of oil and other basic industrial commodities, raising fears about a global economic slowdown. Analysts said the overseas woes had been offset by signs of health in the U.S. economy., which, despite the September jobs figures, is expected to continue its patter of moderate growth.
The S 500 fell 7% in the third quarter, the largest quarterly decline since the third quarter of 2011. In a report Friday morning, Goldman Sachs revised downward by 3% its estimate of earnings for the S 500 companies for the rest of the year but but forecast stocks to recover 4% from current levels.
