NEW YORK – Stocks fell Friday after the Labor Department reported surprisingly strong gains in jobs and wages, which in turn could spark inflation and prompt the Federal Reserve to keep raising interest rates.
The Dow Jones industrial average (search) fell 52.07 points, or 0.49 percent, to end at 10,558.03. The Standard & Poor's 500 index (search) slipped 9.44 points, or 0.76 percent, to finish at 1,226.42. The technology-laced Nasdaq Composite Index (search) dropped 13.41 points, or 0.61 percent, to close at 2,177.91.
For the week, stocks fell. The blue-chip Dow dropped 0.8 percent, while the S&P 500 declined 0.6 percent and the Nasdaq slipped 0.3 percent.
"You had the jobs report -- in particular, the wage growth numbers raised inflation concerns and worried investors that interest rates will keep rising," said Chris Burba, a market analyst at Standard & Poor's.
On the positive side, Baidu.com (BIDU), China's largest Web search company, referred to by many as "China's Google," saw its stock's price quintuple on its first day of public trading.
The Labor Department (search) reported nonfarm payrolls (search) rose by 207,000 in July, compared with a revised increase of 166,000 in June. Analysts surveyed by Reuters had expected the report to show employers added 183,000 jobs last month.
Nonfarm payrolls are considered an important indicator of the economy's health, and the data may partly determine how the Federal Reserve adjusts monetary policy.
Federal Reserve (search) policy-makers are expected to raise the short-term federal funds rate when they meet next Tuesday, which would be the 10th hike since last June, but investors have been longing for a sign that the Fed will stop its yearlong streak of interest rate hikes. An end to rate hikes is unlikely if the job market stays this strong.
Higher oil prices also weighed on stocks. Crude oil settled up 93 cents at $62.31 per barrel on the New York Mercantile Exchange (search), a record settlement price, as problems at several refineries stirred concerns about supply.
The decline in the Dow Jones home construction companies' index came as the yield on the benchmark 10-year U.S. Treasury note rose to 4.4 percent, its highest level in about four months. The note's yield is used as a proxy for lending rates, including mortgage rates.
"A nagging concern would be if bond yield continue to go higher," said Steven Goldman, chief market strategist, Weeden & Co. in Greenwich, Conn., since rich bond yields make stocks less attractive. "Assuming that does not occur, I think stocks can find support in the next week or two and start to stabilize."
Among decliners in the Dow Jones index of homebuilders were Toll Brothers (TOL), down 7.2 percent, or $3.93, at $50.95, and D.R. Norton Inc., down nearly 4 percent, or $1.37, at $33.09.
Shares of mortgage lenders also slipped, with Countrywide Financial Corp. (COF)down 0.6 percent, or 20 cents, at $35.01, and Fannie Mae (FNM) , down 1.6 percent, or 91 cents, at $54.96.
The meteoric debut of the Beijing-based Baidu.com (BIDU) was reminiscent of the Internet companies' IPO heyday, when shares of new online and technology companies routinely doubled or tripled on their first day of public trading.
Baidu.com's stock was at $122.54, up 354 percent from its initial offering price of $27 per American depositary share, or ADS. Earlier, the stock hit a session high at $151.21 -- or more than five times its IPO price.
Baidu.com's market entry overshadowed that of world Web search leader Google Inc.'s IPO last year.
Meanwhile, Microsoft Corp. (MSFT), a Dow component and one of the Nasdaq's most heavily weighted issues, rose 1.6 percent, or 44 cents, to $27.76. The company Thursday named Kevin Turner, chief executive of Wal-Mart Stores Inc.'s Sam's Club warehouse stores business, as its new chief operating officer.
Auto parts supplier Delphi Corp. (DPH) Friday said it is in talks with former parent General Motors Corp. and its main unions about a restructuring of its unprofitable operations. Delphi also said it would draw $1.5 billion from a $1.8 billion revolving credit facility.
Delphi's stock fell more than 14 percent, or 82 cents, to $4.96, making it among the biggest percentage decliners on the New York Stock Exchange.
Viacom Inc. (VIAB) rose 12 cents to $34.19 after its second-quarter earnings were flat compared with the same period a year ago, when the company still owned the Blockbuster video unit. Excluding that and other discontinued operations, earnings, reported after the close of regular trading Thursday, rose 6 percent, beating analysts estimates by a penny.
Goodyear Tire & Rubber Co. (GT) said after the close of trading Thursday its second-quarter earnings doubled, beating analysts' estimates, as sales reached a record. The company also said it would raise some of its prices as its raw materials costs increase. Its stock rose $1.04 to $18.49.
Volume was fairly active on the NYSE, where about 1.50 billion shares changed hands, above last year's daily average of 1.46 billion, while on Nasdaq, the pace was slower, with 1.51 billion shares traded, below last year's daily average of 1.81 billion.
Decliners outpaced advancers by a ratio of more than 3 to 1 on the NYSE and about 2 to 1 on the Nasdaq.
The Russell 2000 index of smaller companies fell 9.05, or 1.35 percent, to 662.79.
Overseas, Japan's Nikkei stock average fell 0.98 percent. In afternoon trading, Britain's FTSE 100 was down 0.02 percent, Germany's DAX index was down 0.96 percent, and France's CAC-40 was down 0.84 percent.
Reuters and the Associated Press contributed to this report.
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