Cyclical groups reacted sharply to a US job market report that missed already modest expectations.
Technology, down 1.4 per cent, contributed the most to a 1 per cent decline in the S&P 500 index to 1,300.16, its lowest in nearly two and a half months.
Monster Worldwide, the job postings website, dropped 5.7 per cent to $13.58, its lowest since October 2010.
Semiconductor groups continued their decline, as analysts predicted a fall in demand this year. The Philadelphia “Semis” index fell 1.9 per cent, for a 3.3 per cent drop on the week.
The Nasdaq Composite was the biggest loser, falling 1.5 per cent to 2,732.78.
Jabil Circuit, manufacturer of electronics equipment, fell 4 per cent to $19.95, and MEMC Electronic Materials, a maker of solar panel chips, ended 3.6 per cent lower at $9.64.
Analysts at Deutsche Bank, citing declining demand, said they favoured chipmaking groups “that have already taken inventory adjustment”, including Intel, whose shares fell 1.6 per cent to $21.73.
Materials and industrials fell 1.3 per cent. Alcoa, the aluminium producer, sank 1.9 per cent to $15.91, and equipment maker Caterpillar dropped 1.9 per cent to $100.22.
Their losses led the Dow Jones Industrial Average to slip 0.8 per cent to 12,151.26.
Especially hard hit were groups tied to raw materials, even as the dollar slipped. Chemicals group Du Pont shed 1.7 per cent to $50.29, a four-month low. Eastman Chemicalfell 2.3 per cent to $100.68.
“People were holding out hope that we’re in a soft patch, and this number looks like it’ll make for a soft-soft patch. To the extent people had a cyclical bet on, they’re taking it off,” said Jim Grefenstette, a senior portfolio manager at Federated Investors.
Shares in Newell Rubbermaid, a producer of durable consumer goods, tumbled 12 per cent to $14.97, leading the decline in the S&P index.
Newell said it was lowering its earnings per share growth estimates for 2011 to between 5 and 10 per cent, from 10 to 12 per cent, citing “persistent softness in the US economy and increased inflationary pressure”.
The US economy produced just 54,000 jobs in May, well below the 165,000 jobs expected by a broad survey of economists, though many had already lowered their expectations to less than 100,000 following poor private figures earlier this week.
That followed the Case-Shiller index showing home prices had slipped into a “double dip”, and an ISM manufacturing index coming in below forecasts – though the ISM’s services index bested expectations on Friday.
The S&P was still less than 5 per cent off its high for the year, falling 2.3 per cent on the week. The Dow and the Nasdaq matched that 2.3 per cent decline over the shortened week.
“Markets have held up rather well despite a steady drip of bad news,” said David Kelly, chief market strategist at JPMorgan Funds.
“The numbers this week showed inventories are so tight, production isn’t sufficient even to keep up with the languid pace of demand. Eventually, that will boost shares,” said Mr Kelly.
Some of the best news for companies continues to be share repurchases.
Walmart shares were up 0.2 per cent to $53.66 after it announced a $15bn share buy-back authorisation.
Drugmaker Forest Laboratories also said it was buying back $500m in shares in an accelerated programme. The shares added 3.7 per cent to $36.90.
American Tower, the broadcast and wireless group, fell 5.8 per cent to $51.21, after the company revealed that it had received a subpoena from the US Securities and Exchange Commission related to its tax and accounting policies. The company said it was co-operating with the probe.
Shares in Goldman Sachs bounced back 0.7 per cent to $135.33. It fell more than 1 per cent on Thursday on news that the top New York City prosecutor was seeking documents related to its pre-crisis activities.
M&A activity did not aid shares this week. ProLogis, the warehouse real estate investment trust, dropped 0.2 per cent to $34.00 after it announced an intention to expand its presence in Asia.
Shares in Sealed Air, the maker of Bubble Wrap, fell 15 per cent on the week, to $21.89, after announcing a $4.3bn acquisition of Diversey, a cleaning products group at very large 52 per cent premium.
Retailers were broadly weaker this week after May sales were reported to be below expectations. Target fell 4 per cent to $47.40 and Gap fell 6.7 per cent to $17.92.