By Tanya Agrawal
REUTERS - U.S. stocks were weaker but well of their lows on Friday morning as a disappointing jobs report raised doubts about the strength of the labor market and whether the economy was robust enough for an interest rate hike.
Nonfarm payrolls rose by 142,000, below the 203,000 that economists had expected, and August and July figures were revised lower. The jobless rate held steady at 5.1 percent but average hourly wages fell by a cent from August.
With job growth slowing for the last three months, economists said the Federal Reserve was now unlikely to raise interest rates this year.
The report, the last before the Fed's meeting at the end of October, appeared to belie Fed Chair Janet Yellen's comment last week that the U.S. economy was strong enough to withstand a rate hike this year.
A small hike in rates would be a vote of confidence in the economy and help calm volatile equity markets.
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"The Fed has to be off the table until 2016 now," said Jonathan Lewis, chief investment officer at Samson Capital Advisors in New York.
"This jobs number was extraordinarily weak, and it was a warning signal to the entire world that they can't rely on the U.S. for growth."
U.S. interest rates futures rose sharply after the jobs report. Odds of a December rate hike fell to a little over 27 percent from 44 percent before the report.
With the third-quarter earnings season starting next week, investors are also starting to factor in what is likely to be the biggest decline in earnings for S&P 500 companies in six years.
The dim outlook for U.S. corporate results have some strategists talking about an "earnings recession" - meaning two quarters of declining profits in a row.
Fed Vice Chair Stanley Fischer is scheduled to speak in Boston at 1:30 p.m ET (1730 GMT).
At 11:30 a.m. ET, the Dow Jones industrial average was down 100.45 points, or 0.62 percent, at 16,171.56, the S&P 500 was down 11.73 points, or 0.61 percent, at 1,912.09 and the Nasdaq composite was down 19.62 points, or 0.42 percent, at 4,607.46.
Banks, which would benefit from higher interest rates, were among the biggest losers. Goldman Sachs' 2.6 percent fall weighed the most on the Dow, while Bank of America was the biggest drag on the S&P with a drop of 3.9 percent.
Six of the 10 major sectors were lower, with the financial index's 2.11 percent fall leading the decliners.
The S&P 500 and the Nasdaq closed slightly higher on Thursday in a choppy start to the fourth quarter, while the Dow was slightly down.
Declining issues outnumbered advancing ones on the NYSE by 1,905 to 1,042. On the Nasdaq, 1,563 issues fell and 1,083 advanced.
The S&P 500 index showed one new 52-week high and 56 new lows, while the Nasdaq recorded five new highs and 171 new lows.
(Reporting by Tanya Agrawal; Additional reporting by Abhiram Nandakumar; Editing by Savio D'Souza and Saumyadeb Chakrabarty)