Energy stocks led the market's slide as crude oil prices declined. Health care companies and retailers also pulled the market lower. Most homebuilders rose following a big jump in January housing starts.
The U.S. jobs report is the latest batch of discouraging economic news to give investors a reason to sell and pocket some of their recent gains as they wait for the next positive headline or economic data to pave the way for stocks to move higher again, said Mark Watkins, regional investment strategist at U.S. Bank Wealth Management.
"We've had a very solid run and there are investors who are going to be taking a little bit of money off the table," Watkins said. The S&P 500 dropped 5.86 points, or 0.2 percent, to 2,743.07. The benchmark index has fallen five days in a row, its longest losing streak in nearly four months.
The Dow Jones Industrial Average lost 22.99 points, or 0.1 percent, to 25,450.24. The average briefly fell more than 220 points. The Nasdaq composite declined 13.32 points, or 0.2 percent, to 7,408.14. The Russell 2000 index of smaller companies gave up 1.74 points, or 0.1 percent, to 1,521.88.
Major European indexes closed lower. The market's momentum has stalled this week after enjoying a sharp bounce back at the start of this year. This week's losses for the S&P 500 are the worst since December, but not as severe as they were then, when worries were peaking about a slowing global economy and that interest rates may rise too quickly. Since then, the Federal Reserve helped calm some of the worries by pledging to be patient in raising rates.
Still, investors are feeling increasingly uneasy about the global economy. The Organisation for Economic Co-operation and Development said this week that it expects global growth to be 3.3 percent this year, down from the 3.5 percent that it had forecast just four months ago.
The OECD said economic prospects are weaker in nearly all the countries that make up the G20 than previously expected, and it cited a slowdown in trade and global manufacturing, among other reasons. The United States and China have been locked in a particularly tense trade dispute, though the countries say they're making progress in negotiations.
Analysts are debating whether the U.S. stock market's latest moves are the last gasps for the longest bull market on record for U.S. stocks, which began 10 years ago this weekend, or just the latest challenge for it muddle through.
"Right now, the U.S. economy is gradually slowing, and earnings are trending a little bit lower," Watkins said. "Any news that has been coming out that hasn't been that strong has been a little bit of a negative catalyst for the market to have a reason to move back just a little bit."
The strong U.S. labor market has been a major pillar of support for the stock market's run in recent years, but Friday's jobs report was surprisingly bad. Employers added just 20,000 jobs last month, when economists were expecting something closer to 180,000. Last month's job growth was also a sharp slowdown from January's 311,000, a number that the government revised higher on Friday.
A slower global economy wouldn't need as much oil, and the price of crude sank Friday along with expectations for demand. Benchmark U.S. crude fell 1 percent to settle at $56.07 per barrel. Brent crude, the international standard, lost 0.8 percent to close at $65.74 per barrel.
The sharp decline sent energy companies to double the loss of any of the other 10 sectors that make up the S&P 500. They ended 2 percent lower. Also hurting the sector was a decision by Norway's $1 trillion wealth fund to dump shares in some oil and gas companies. The move would exclude companies that operate solely in exploration or production, but it will continue to own the biggest companies in the energy industry.
Noble Energy and EOG Resources tumbled 5.4 percent. New U.S. residential construction data gave traders reason to be more optimistic about homebuilder stocks. The Commerce Department said housing starts jumped 18.6 percent in January, as builders ramped up construction of single-family houses to the fastest pace in eight months. The rebound after December's plunge bodes well for the new-home market heading into the spring homebuying season.
Hovnanian Enterprises gained 4 percent. KB Home added 1.5 percent. Traders hammered National Beverage after the maker of La Croix soft drinks reported disappointing quarterly earnings. The CEO issued a puzzling statement saying, "We are truly sorry for the results stated above," and blamed the weak performance on unspecified "injustice." The stock slumped 14.6 percent.
Costco Wholesale bucked Wall Street's downward trend, climbing 5.1 percent for the biggest gain among stocks in the S&P 500. The warehouse club operator reported profit growth that was far stronger than analysts expected.
Other retailers racked up losses. Foot Locker lost 3.3 percent, Ross Stores slid 3.6 percent and Gap dropped 3 percent. The weak U.S. jobs growth helped pull the value of the dollar lower against its peers. The U.S. currency slipped to 111.07 Japanese yen from 111.52 yen late Thursday. The weaker dollar sent the euro up to $1.1242 from $1.1186.
Bond prices were little changed. The yield on the 10-year Treasury note held at 2.63 percent. Gold rose 1 percent to $1,299.30 an ounce. Silver climbed 2.1 percent to $15.35 an ounce. Copper declined 0.6 percent to $2.89 a pound.
In other energy futures trading, wholesale gasoline slid 0.2 percent to $1.80 a gallon. Heating oil dropped 0.6 percent to $2 a gallon. Natural gas held steady at $2.87 per 1,000 cubic feet.