Stocks end the week with rally despite jobs miss

Stocks rebounded from early losses Friday to end the week on a strong note even though April jobs growth was lighter than expected and raised concerns about the strength of the U.S. economy.

Employers added just 160,000 jobs in April as the unemployment rate remained at 5%, the Labor Department reported.  Economists were expecting 200,000 new jobs last month and a drop in the unemployment rate to 4.9%.

"This morning's report was disappointing," said TD Economics economist Michael Dolega. "After two months of 200k+ job growth, payroll gains slowed to their lowest pace in seven months."

Employers added disappointing 160,000 jobs in April

Though the stock market initially shrugged off the news, the Dow Jones industrial average dropped as much as 80 points in morning trading before trimming its losses. The Dow closed up 80 points, or 0.5%, at 17,741. The Standard & Poor's 500 index rose 0.3% after earlier almost wiping out its gain for 2016.

The Nasdaq composite index gained 0.4% and avoided its 11th day of losses out of the past 12 trading sessions. Earlier, the tech-heavy index was more than 10% below its record close in July and back in correction territory, but by the close it trimmed that loss to 9.2%.

The weak labor report puts a June rate hike by the Federal Reserve off the table, according to some economists.

"We now only expect one rate hike in 2016, in September, down from two hikes previously, as we believe it will take longer for policymakers to accumulate sufficient evidence that economic and labor market activity is rebounding after a soft start to the year," according to a research note from Barclays Bank.

Don Rissmiller, chief economist at Strategas Research Partners, agrees. "We were not looking for the Fed to hike rates at the June meeting, but today’s report makes this event less likely at the margin, given the mixed data," he said in a note to clients.

Overseas, European shares were mixed Friday. Germany’s DAX rose 0.2% and France’s CAC-40 dropped 0.4%. The FTSE 100 index of leading British shares rose 0.1%.

Asian markets fell as Japan’s Nikkei 225 index fell 0.3% to 16,106.72. Hong Kong’s Hang Seng index dropped 1.7% to 20,109.87, while the Shanghai composite index plunged 2.8% to 2,913.25.