Stocks fell Friday after data showing a sharp slump in the pace of job hiring last month prompted investors, wary of an economic slowdown, to sell shares of cyclical stocks like Caterpillar Inc. (CAT).

The Dow Jones industrial average (search) ended down 51.33 points, or 0.50 percent, at 10,282.83, while the Standard & Poor's 500 Index (search) was down 3.56 points, or 0.32 percent, at 1,125.38. The tech-heavy Nasdaq Composite Index (search) was down 8.89 points, or 0.44 percent, at 2,006.66.

For the week, stocks fell. The blue-chip Dow average and the tech-driven Nasdaq each slipped 0.9 percent, while the broader S&P 500 was off 0.8 percent.

The sell-off, which sent the Dow down to its lowest level in nearly a month during the session, was sparked by data that showed the pace of U.S. job growth fell off sharply in June after several months of robust gains.

"The payroll report was weaker than people anticipated," said Edward Riley, chief investment strategist at State Street Global Advisors. "People are now saying we should start looking at the earnings to see how much of a slowdown is taking place."

The Labor Department (search) said the economy created 112,000 jobs in June, less than half the number economists expected. After three months of strong job growth, the latest report was a letdown to many investors, though those worried about inflation may have found some consolation in the data, as less jobs means weaker demand for goods and less pricing pressure.

"It's not like the economy's going into the tank here, but in comparison the spring was just unusually strong," said Scott Brown, chief economist for Raymond James. "And now we'll probably see a lot of volatility this summer as we try to figure out the true strength of the economy and what the Federal Reserve will do with interest rates."

Volume was very light in advance of the Independence Day holiday, with few investors making bold moves in advance of the three-day weekend. The markets were scheduled to be closed on Monday.

The nation's unemployment rate remained steady at 5.6 percent, the Labor Department said, though the number of new jobs in the manufacturing sector, a key barometer of economic growth, dropped by 11,000. Average hourly wages climbed by a less-than-expected 0.1 percent.

The report came just two days after the Fed raised interest rates by a quarter percentage point — the first hike in four years — in hopes of slowing down the speeding economy. Should job creation data continue to slide in July and August, the Fed's move could be seen as premature in hindsight.

And the summer rally investors were hoping for after the Fed move isn't likely to materialize, analysts said, as investors pour over each new economic indicator to see whether the economy's growth will continue to slack.

"The market's are still pretty expensive, but the justification for that price is this great earnings growth," said Russ Koesterich, U.S. equity strategist at State Street Corp. "But if the economic growth is slowing down, earnings will slow down, and then can you justify these prices? That's the question. It's going to be a long, slow summer, I'm afraid."

On the positive side, the Commerce Department reported factory orders fell by just 0.3 percent in May, less than the 0.5 percent decline economists anticipated.

In industry news, worldwide sales of semiconductors rose to $17.32 billion in May, up 36.9 percent from a year ago, according to the Semiconductor Industry Association. The news did not help chip stocks, however. Intel Corp. (INTC) was down 69 cents at $26.33, while Advanced Micro Devices Inc. (AMD) lost 23 cents to $15.27.

Apple Computer Inc. (AAPL) tumbled $1.22 to $31.08 after the company said the debut of its new iMac personal computer would be delayed until September, forcing the company to miss the lucrative back-to-school sales season.

Microsoft Corp. (MSFT) continued its costly settlement of class-action lawsuits around the nation. The software giant said late Thursday it would pay up to $241.4 million to settle a class-action case in Minnesota. Microsoft slipped 6 cents to $28.57.

Shares of companies especially vulnerable to swings in the economy fell amid concern that profits might be in jeopardy if growth slows.

Heavy equipment maker Caterpillar ended off $1.46 at $76.72, while shares of aluminum company Alcoa Inc. (AA) closed down 12 cents at $32.18. Diversified manufacturer 3M Co. (MMM) shares slipped to end down 67 cents at $87.50.

But the job numbers boosted housing stocks as investors bet that the Federal Reserve would be slow to increase interest rates following the weak employment figures.

Home builder and mortgage company Centex Corp. (CTX) closed 76 cents higher at $46.01 and Los Angeles-based home builder KB Home (KBH) advanced $1.32 to end at $69.12. Michigan-based home builder Pulte Homes Inc (PHM) gained $1.12 to $52.86.

"It's the combination that the Fed will be able at move at the measured pace that they spoke about and that this 25-basis-point move may carry a little bit longer than originally intended," said Argus Research analyst Kevin Tynan.

Shares of WebMethods Inc. (WEBM), a business software maker, fell more than 32 percent after the company warned of a hefty fiscal first-quarter loss, which was well short of Wall Street expectations. The stock ended down $2.71 at $5.63.

Advancing issues barely outnumbered decliners on the New York Stock Exchange, where volume came to 136.96 million shares, compared with 144.54 million at the same point Thursday.

The Russell 2000 index of smaller companies was up 0.29, or 0 percent, at 582.72.

Overseas, Japan's Nikkei stock average dropped 1.5 percent. In Europe, Britain's FTSE 100 closed down 0.4 percent, France's CAC-40 lost 0.8 percent for the session and Germany's DAX index fell 0.9 percent.

Reuters and the Associated Press contributed to this report.