With the private sector adding only 38,000 jobs in May, the U.S. labor market made its worst growth showing in more than five years and made a hike in interest rates less likely for the summer, economists say.
Economists had anticipated a jobs gain of about 160,000.
"The very weak May jobs report calls into question whether the Federal Reserve will move to raise interest rates in June or July," explained Jim Wyckoff, a Kitco senior technical analyst, in a note on Friday.
The market put the probability for a June move at 6%, down from the previous 21% chance, according to the CME Group. The chance for a July hike is now 42% vs. 58%. Still, the probability of a September rate hike is now 52%.
In addition, JPMorgan analysts say the likelihood of a recession beginning within the next 12 months has never been higher during the current economic recovery.
"Our preferred macroeconomic indicator of the probability that a recession begins within 12 months has moved up from 30% on May 5 to 34% last week to 36% today," wrote Jesse Edgerton in a report Friday. "This marks the second consecutive week that the tracker has reached a new high for the expansion."
Investors turned away from equities in general, driving the SPDR S&P 500 ETF Trust (SPY) down about 0.4%.
Impact on Financials, Gold
Meanwhile, investors lost interest in financial stocks, which benefit from rising rates via cash-sweep accounts. The Select Sector SPDR Financial ETF (XLF) dropped about 1.5% Friday.
LPL Financial (LPLA), for instance, was down 6%; Charles Schwab (SCHW) sank 5%, and TD Ameritrade (AMTD) dropped 4.5%. Bank of America (BAC) fell 3.5%, while Morgan Stanley (MS) weakened 3%.
At the same time, investors turned to safe-haven assets like gold, pushing the SPDR Gold ETF (GLD) up 2.5%.
According to ETF.com, gold ETFs attracted over $3 billion in new assets in May, with GLD drawing some $8.8 billion in the first five months of 2016.
