NEW YORK, Oct 8 (AFP) - Soft economic news and sky-high oil prices left Wall Street investors running for cover over the past week as investors turned skeptical about claims that the US economy was gaining traction.
Over the past week, the Dow Jones Industrial Average dropped 1.34 percent to 10,055.20, while the Standard and Poor's 500 broad-market index shed 0.83 percent to 1,122.14.
The tech-heavy Nasdaq composite tumbled by 1.14 percent to 1,919.97.
Trading had been cautious throughout the week as Wall Street awaited a key report on the US labor market for September and watched a steady rise in crude oil futures, which ended at a record closing price Friday above 53 dollars a barrel.
Friday's payrolls report was the latest in a string of disappointing economic reports, showing a gain of just 96,000 jobs in September, well below most forecasts and lower than needed to keep pace with new labor market entrants.
The news prompted many on Wall Street to question Federal Reserve chairman Alan Greenspan's claim that the economy is gaining traction and will be strong enough to withstand higher interest rates.
"This has been a tough week for the stock market," said Joe Battipaglia, chief investment officer at Ryan, Beck and Co.
"Most of the indicators have suggested a softer economy which would then suggest the profit picture isn't explosive from here on to the new year."
The payrolls report "suggests that the US economy may be losing momentum again as it enters the fourth quarter -- there may be another 'soft patch' ahead," said Nigel Gault of the economic research firm Global Insight.
"Sluggish employment growth means that there is insufficient fuel to keep consumer spending growth at the 4.7 percent rate expected for the third quarter. In addition, the economy faces the return of two dollar-plus gasoline prices if crude oil prices stay at 50 dollars or more."
"The onus is on the Fed. Where's the traction Greenspan is talking about?" said Peter Frank, analyst with ABN Amro in Chicago.
"As the world's largest importer of crude, all of a sudden prospects for the once hot US economy don't look so hot anymore," said CIBC World Markets chief economist Jeff Rubin.
"And just as suddenly, the hundreds of basis points of central bank tightening that investors had braced their portfolios for are rapidly being priced out of the market. Instead of losing momentum along an arduous march to higher interest rates, the North American economy will soon be feeling the brake of soaring energy prices."
But Ralph Acampora at Wachovia Securities said he believes the stock market is in a consolidation phase ahead of a new push higher.
"If we are correct and the current market consolidation phase is nearing an end, then volume will most likely expand in the weeks and months ahead of us," Acampora said in a note to clients.
"In anticipation of such a move we continue to urge our readers to become more bullish."
Bonds firmed as the disappointing jobs report suggested sluggish growth ahead and less aggressive action by the Federal Reserve on boosting interest rates.
The yield on the 10-year US Treasury bond dropped to 4.133 percent from 4.191 percent a week earlier and that on the 30-year bond to 4.902 percent from 4.949 percent. Bond yields and prices move in opposite directions.