Wall Street headed for its worst week in over two months on Friday after a dismal jobs report, with a worsening economic outlook threatening further fall from current six-week lows.

If stocks end the week lower, it would be the fifth straight week of losses.

However, with stocks oversold in the short-term, investors latched on to a report showing that growth accelerated in May in the huge services sector, a welcome sign after other recent data showed the economic recovery slowing.

The report from the Institute for Supply Management helped stocks to cut their losses in half after a one per cent drop.

Still, the S&P 500 intermittently tested its April low at 1,294.70 through the morning, a level that if broken, analysts say, could take the index back toward its 200_day moving average at around 1,250.

“Our concerns are that long-term momentum is still more overbought than not.

“I think you’re going to have to get a lot of those longer term measures flushed out” said Ari Wald, an analyst at Brown Brothers Harriman in New York.

“We’re looking at 1,230 on the downside.”

Wald said he was expecting the market to bottom in the third quarter but did not rule out a short-term bounce from current levels.

The government’s payrolls report, which showed 54,000 jobs added in May, was the weakest reading since September, while the U.S. unemployment rate rose to 9.1 per cent from nine per cent in April.