Stocks Fall Despite Strong Employment Report

NEW YORK – Stocks fell Friday as concerns that share prices may be getting too high outweighed a surprisingly strong report showing the labor market is finally catching up with the broader economic recovery.

The technology-heavy Nasdaq Composite Index (search) slipped 5.63 points, or 0.28 percent, to 1,970.74. Earlier in the session it hit a high of 1,992.27, a level not seen since Jan. 15, 2002.

The blue-chip Dow Jones industrial average (search) fell 47.18 points, or 0.48 percent, to 9,809.79. The broad Standard & Poor's 500 Index (search) dipped 4.84 points, or 0.46 percent, at 1,053.21. Earlier, both market gauges hit their highest levels since June 3, 2002.

For the week the Nasdaq rose 1.99 percent, while the Dow ticked up 0.09 percent and the S&P 500 inched up 0.24 percent.

The U.S. economy added more than twice the number of jobs expected in October in the third straight monthly gain, and the unemployment rate (search) fell, the government said in a report pointing to a labor market recovery.

Stocks opened higher Friday, but major market gauges cut gains just minutes after the bell and ended below the fresh 2003 highs they hit early in the session. Stocks have surged the past several months as investors bet on a solid economic rebound.

"I think the employment report validates" investors' expectations for strong growth, "but it was anticipated by the market going back six months," said Joseph V. Battipaglia, chief investment officer at Ryan Beck & Co.

It was a fairly muted response to the jobs number ... there was anticipation that the number was going to be good anyway," said John O'Donoghue, managing director of listed trading at Credit Suisse First Boston. "Everybody thought we'd be off to the races, but in essence we've priced in a lot of the expectations already."

Employment had been the missing ingredient in the economic rebound. The report showed the number of workers on U.S. payrolls outside the farm sector soared 126,000 in October, the largest rise since January, after climbing 125,000 in the previous month. The number was far better than analyst expectations for a gain of just 58,000.

The unemployment rate fell to 6 percent, the lowest since April, from 6.1 percent in September. That also beat economist expectations for the jobless rate to remain unchanged.

Graphics chip designer Nvidia Corp. (NVDA) surged $3.58, or 19.7 percent, to $21.75. On Thursday, Nvidia said it swung to a quarterly profit on a stronger-than-expected 13 percent rise in revenue and noted that current-quarter sales would be above Wall Street's average estimates.

Altria Group Inc. (MO) jumped $2.21, or 4.7 percent, to $49.51 and ranked as the Dow's biggest percentage gainer. Merrill Lynch said it added the tobacco company to its "focus list" of recommended stocks.

Eastman Kodak (EK), another Dow component, tacked on 42 cents, or 1.7 percent, to $25. Chairman Daniel Carp is expected to meet early next week with investor Carl Icahn, who has received regulatory approval to buy a big stake in Kodak, The Wall Street Journal said on Friday.

Wyeth (WYE) tumbled $2.98, or 6.9 percent, to $39.72 after a Texas jury awarded $1.36 million to a woman who claimed she was injured by its diet pills.

McDonald's Corp. (MCD) rose 42 cents, or 1.6 percent, to $26.40. The Dow component said October sales at restaurants open more than a year rose 8.4 percent as Europe turned positive and the United States posted its highest monthly increase in more than 5 years.

Barnes & Noble.com (BKS) leaped 51 cents, or 22.7 percent, to $2.76. The top U.S. bookseller, Barnes & Noble Inc. (BN) , said it plans to take the loss-making Web bookstore unit private, buying all shares it does not already own in a deal worth about $115 million.

Volume was active with 1.41 billion shares changing hands on the New York Stock Exchange and 1.95 billion traded on the Nasdaq.

Despite a drop in the indexes, advancers outnumbered decliners by about 6 to 5 on the NYSE and were in about a one to one ratio on the Nasdaq.

The Russell 2000 index, a barometer of smaller company stocks, edged up 0.02 to 542.96.

Overseas, Japan's Nikkei stock average finished 0.7 percent higher. In Europe, France's CAC-40 advanced 1.2 percent, Britain's FTSE 100 rose 1.2 percent and Germany's DAX index gained 1.3 percent.

Reuters and the Associated Press contributed to this report.