Stocks fell Friday as a mixed bag of earnings news added to worries that a better-than expected monthly jobs report may convince the Federal Reserve to not cut interest rates aggressively this month.

The blue-chip Dow Jones industrial average fell 38.40 points, or 0.36 percent, to 10,512.78, and the  technology-laced Nasdaq Composite Index shed 21.31 points to 2,066.07. The broader Standard & Poor's 500 Index lost 6.39 points to 1,214.36.

For the week, the Dow gained 0.9 percent, the Nasdaq was up 1.8 percent, and the S&P 500 rose 0.7 percent. Year-to-date, the Dow is down 2.5 percent, Nasdaq is 16.4 percent lower and the S&P 500 is off 8 percent.

``We're in the summer doldrums,'' said James Oberweis, portfolio manager at Oberweis Asset Management. ``The earnings reports are not strong and there's a lack of investor enthusiasm or anything.''

Fallout from the lagging economy has forced analysts to chop Corporate America's profit outlook. Wall Street now expects companies to post flat earnings in the fourth quarter -- a far cry from the 12.6 percent growth forecast four months ago, according to research firm Thomson Financial/First Call.

That would mark the first time since the nation's last recession in 1991 that corporate profits landed flat or lower for four straight quarters. And analysts' estimates for the fourth quarter could soon slip into negative territory.

The Labor Department said in its report that the U.S. jobs market showed unexpected resilience last month. The unemployment rate for July held steady at 4.5 percent, while expectations were for it to rise to 4.6 percent. The data also showed the loss of jobs in the non-farm sector was 42,000 last month, beating estimates of a loss of 50,000 jobs.

Still, another 49,000 manufacturing jobs were lost, continuing a year-long slide, and analysts pointed to this as one possible reason for the lukewarm response to the data.

"On the surface it is better than expected but some people may be reading into it and thinking that the Fed may not cut 50 basis points and only do 25 points," said Peter Cardillo, director of research at Westfalia Investments. The Fed, which meets next on Aug. 21, has already slashed interest rates six times this year in a bid to revive the sluggish U.S. economy.

On the corporate front, Sensormatic Electronics jumped nearly 55 percent, or $8.18, to $23.12 after the company said it agreed to a $2.3 billion takeover by Tyco International Ltd. Tyco shares rose 51 cents to $53.29.

The Walt Disney Co., the entertainment giant, reported quarterly earnings that landed at the top end of the Street's forecasts. But Walt Disney's Chief Financial Officer Tom Staggs said he expects the business dynamics of weak advertising and a softer economy in the third quarter to continue into the fourth quarter. Disney, one of the 30 issues making up the Dow index, added 74 cents to $27.29.

Noven Pharmaceuticals Inc., a maker of drug delivery products, tumbled $14.29 to $19.03, or more nearly 43 percent, on Nasdaq. The company posted slightly lower quarterly profits and warned full-year results would fall short of expectations due to a lack of product orders.

Agile Software lost 7 cents to $11.73 on the Nasdaq, cutting losses. It warned first-quarter earnings would fall short of Street expectations, the latest business-to-business software company to fall prey to sagging market conditions.

In other earnings news, Internet search services Ask Jeeves reported a second-quarter loss, reflecting the soft online advertising market and the slowdown in corporate spending, but said it significantly reduced its loss from a year ago. Shares fell 38 cents to $1.18, or nearly 24 percent.

Ethan Allen Interiors Inc. profits fell by one-third, meeting its lowered estimate. The home furnishings maker and seller warned sales and earnings in its fiscal first quarter would be lower than expected due to softer economic activity. Shares fell to $37.55, or 45 cents.

Conglomerate Tyco International Ltd. said it would acquire anti-theft equipment maker Sensormatic Electronics Corp. in a stock swap valued at about $2.2 billion, expanding Tyco's portfolio of electronic security equipment. Tyco fell 58 cents to $52.20 while Sensormatic bolted more than 54 percent higher, or $8.07 to $23.01 and was the most actively traded issue on the Big Board.

The U.S. economy and corporate profits were supposed to turn around in the fourth quarter of this year, but Wall Street now predicts U.S. companies will report flat earnings in this year's last quarter.

Analysts now expect companies in the Standard & Poor's 500 index to report zero profit growth in the fourth quarter, First Call said. That's a far cry from the earnings growth of 12.6 percent expected just four months ago. This would mark the first four-quarter profit slump since 1991, when the U.S. economy was mired in recession.

Declining issues led advancers by about 7 to 4 on the New York Stock Exchange. Volume was 415 million shares, compared to 563 million shares a day earlier.

The Russell 2000 index dropped 4.36 Friday to 484.63.

Overseas, Japan's Nikkei stock average dropped 1.3 percent. European stocks also fell. Germany's DAX index was down 0.4 percent, Britain's FT-SE 100 was down 0.7 percent, and France's CAC-40 fell 1.1 percent.

-- Reuters and the Associated Press contributed to this report.