Retail stocks dropped 2 percent Friday as investors reevaluated their bets on the recovery after weaker-than-expected U.S. job growth and signs of a slow rebound in debt-wracked Europe.


The S&P Retail Index fell 8.83 points to 435.72 in early trading. The Dow Jones Industrial Average retreated 1.8 percent, or 181.68 points, to 10,073.63. Retail decliners included Guess Inc., down 4.1 percent to $35.01, and J.C. Penney Co. Inc., off 3.8 percent, to $26.04.


The Labor Department said overall payrolls expanded by a seasonally adjusted 431,000 last month — less than the 500,000 economists expected — and 411,000 of those jobs were temporary positions related to the 2010 census. The private sector added just 41,000 jobs for the month.


Investors have been closely watching the jobs report for signs that businesses feel good enough about the economy to begin hiring workers in large numbers.


The weak economy kept 15 million people on unemployment rolls last month, but the rate edged down to 9.7 percent from 9.9 percent.


A firming job market would spur purchases at retailers, which in turn could hire more workers and help build a self-sustaining recovery.


Europe is also trying to fight its way back from a downturn and stave off a debt crisis that began with Greece’s budget woes, and has spread across the continent, raising questions about the viability of the euro. The Eurozone’s GDP expanded by 0.2 percent in the first quarter, following 0.1 percent growth in the fourth quarter.


For complete coverage, see Monday’s issue of WWD.

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