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New York - US stocks fell in early trade on Friday after a dismal May jobs report virtually eliminated chances of an interest rate hike by the Federal Reserve this month and possibly July.
Bank shares fell sharply, with Citigroup dropping 5.1% and Bank of America 4.7%, as the prospects for lower rates longer is expected to hit lending margins.
After 60 minutes of trade, the Dow Jones Industrial Average was down 0.8% at 17 703.72.
The broad-market S&P 500 lost 0.9% at 2 087.11, while the tech-heavy Nasdaq Composite fell 1.1% to 4 914.69.
The US economy added a paltry 38 000 jobs last month, the Labour Department said, the lowest number in nearly six years and one-quarter of what economists had forecast.
Coupled with significant downward revisions to job creation figures reported the previous two months, the report suggested the world's largest economy was rebounding from the first-quarter slump much more weakly than thought.
While investors have generally appreciated low interest rates, bank shares had risen in recent months as the Fed itself flagged a likely rate hike in the near future, and more later this year.
"It was clear that unless the jobs report was horrible the Fed was going to hike in either June or July. This now assures that June is off the table but may not rule out July," said Steven Ricchiuto, chief economist at Mizuho Securities.
CME fed rate derivatives trade indicated that expectations of a rate rise by July had dropped from about 60% to 37%. But traders now have September in focus, amid hopes that the hiring downturn last month will prove temporary.
The dollar lost nearly 1.8% against the yen and the euro and US Treasury bond yields sank, the 10-year note falling from 1.80% to 1.71% after the jobs report.
The report also carried down shares of General Motors and Ford, both losing 2.0% as they still felt the hit from a slowdown in US auto sales last month.
Airline shares also plunged, led by a 3.9% loss from American Airlines. United dropped 2.8%.
Meanwhile Oracle rebounded 1.2% after Thursday's 4% slide after a former accountant sued the company alleging it artificially boosted sales reports and fired her after she refused to go along.
