US stocks closed out the trading week on a down note, as early gains from a jobs report that showed a labour market that may be starting to loosen gave way to worries about the European gas crisis.
Wall Street opened sharply higher on Friday after the August US payrolls report showed stronger-than-expected hiring but a climb in the unemployment rate to 3.7 per cent eased some concerns about the Federal Reserve being overly aggressive in raising interest rates as it attempts to bring down high inflation.
However, gains were erased after Gazprom, the state-controlled firm with a monopoly on Russian gas exports to Europe via pipeline which were due to restart on Saturday, said it could not safely restart deliveries until it had fixed an oil leak found in a vital turbine and did not give a new time frame.
"Definitely the afternoon overshadowing the good data from this morning, the afternoon has been stolen from us by those headlines out of Europe," said Zach Hill head of portfolio management at Horizon Investments in Charlotte, North Carolina.
Analysts also pointed to thin trading volumes ahead of the extended holiday weekend helping to exaggerate market moves.
"The set-up is important, there has been some optimism around the European energy situation over the last week or so, long-dated power prices falling almost in half in some instances and signs that Germany had almost 80 per cent of their storage full of gas, so what we are seeing is a little positioning adjustment against that backdrop coupled with a low liquidity Friday afternoon into a holiday weekend," said Hill.
According to preliminary data, the S&P 500 lost 41.23 points, or 1.06 per cent, to end at 3,925.62 points, while the Nasdaq Composite lost 154.12 points, or 1.31 per cent, to 11,631.01. The Dow Jones Industrial Average fell 327.23 points, or 1.03 per cent, to 31,329.19.
Markets are closed on Monday for the Labor Day holiday.
Energy was the only major S&P sector to end the session in positive territory.
While payrolls topped expectations, average hourly earnings rose 0.3 per cent compared with estimates of 0.4 per cent, while the unemployment rate edged up to 3.7 per cent from a pre-pandemic low of 3.5 per cent, indicating that the Fed's efforts to front-load rate hikes were beginning to take effect.
Wage growth data is seen as important to the Fed's deliberations on increasing interest rates as the central bank looks to bring inflation, running at four-decades high, back to its two per cent target.
The focus now shifts to the August consumer price report due mid-month, the last major data available before the Fed's September 20-21 policy meeting.
Fears of aggressive policy tightening have sent stocks lower after hitting a four-month high in mid-August, with the S&P 500 falling about four per cent since Fed Chair Jerome Powell's hawkish remarks last week about rate hikes. His views were later echoed by other policymakers.
All the three main indexes suffered their third straight weekly loss.