Unemployment Report Drags on Wall Street

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Wall Street ended the session in negative territory Friday on investor reaction to a mixed report on unemployment that showed there was still sluggishness in the economy.

The Dow Jones industrial average ended lower 79.83, or .86 percent, at 9,153.97. The Nasdaq Composite was down 19.40, or 1.13 percent, to close at 1,715.62, while the Standard & Poor's 500 index was lower 10.16, or 1.04 percent, to end at 980.15.

For the week, the Dow shed 1.4 percent, while the S&P 500 lost 1.9 percent and the Nasdaq fell 0.9 percent.

The Labor Department jobless report capped a week heavy with economic data. The report showed employers chopped 44,000 workers from their payrolls in July, a reading that contrasted with the expectations of private economists that payrolls would grow by 18,000.

At the same time, the U.S. unemployment rate fell in July for the first time in more than a year, but the drop to 6.2 percent from 6.4 percent was caused by a reduction in the labor force and not by a surge in hiring, the Labor Department said.

Also on Friday, the Institute for Supply Management (search) said Friday its manufacturing index pushed up to 51.8 in July, matching economists' projections and gaining from 49.8 in June.

While the ISM's July survey was in line with analysts' estimates, the number disappointed investors hoping the survey would show a stronger pickup in the factory sector, market experts said.

"I do think the economy is recovering but ... I think a lot of traders are thinking it may not be recovering as fast as we were all hoping," said Peter Dunay, chief market strategist and options specialist at brokerage Wall Street Access. "The way the market moved up, it's either going to have to sit here for six months and wait for the earnings to come up or pull back a little."

Trading has been choppy in recent weeks as investors, having sent stocks surging since mid-March, are now seeking proof of a strong economic recovery. Many investors believe employment in particular must show clear improvement for the rebound to continue.

A bright spot in the slew of economic data was the University of Michigan's gauge of consumer confidence, which rose to 90.9 in July from June's 89.7, sources said. This compared with a mid-month reading of 90.3. Wall Street forecasters had pegged the figure at 90.5, according to a Reuters poll.

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ChevronTexaco Corp. (CVX), the No. 2 U.S. oil company, fell $1.06 to $71.05 after it said its quarterly profit quadrupled as refining and marketing margins improved and gas and oil prices rose.

Johnson & Johnson (JNJ) dropped $1.36 to $50.43 after Merrill Lynch cut the company's stock rating to "neutral" from "buy."

Shares of J.P. Morgan Chase & Co. (JPM) led a broad bank and brokerage stock slide Friday as the bond market's upheaval forced analysts to question the future of recently strong trading profits. Financial sector stocks are among the most sensitive to the impact of rising interest rates.

J.P. Morgan shares fell $1.69, or 4.8 percent, to $33.36, making it the Dow's biggest percentage loser.

Citigroup Inc. (C) stock sank 3 percent or $1.35 to $43.45. The shares of Citigroup, the world's largest financial services provider, also ranked among the Dow's biggest percentage lowers.

Veritas DGC Inc. (VTS) was the biggest percentage loser on the NYSE a day after the oil industry technology supplier said it would post a quarterly loss due to contract delays and the sale of a software business.

Veritas shares fell 17.7 percent, or $1.74, to $8.08.

The Walt Disney Co. (DIS), which posted a 10 percent rise in profits as soaring movie and television network earnings more than offset weakness in the travel market, helped underpin the blue-chip Dow. Its shares rose 60 cents, or 2.7 percent, to $22.52.

Altria Group (MO) rose 27 cents to $40.28 after a California jury cleared its Philip Morris unit of negligence and misrepresentation in a tobacco lawsuit.

Declining issues outnumbered advancers about 5 to 2 on the New York Stock Exchange. Trading was active on the NYSE with 1.36 billion shares changing hands and 1.47 billion traded on the Nasdaq.

The Russell 2000 index, a barometer of smaller company stocks, fell 7.94, or 1.7 percent, to 468.08.

The 10-year U.S. Treasury note's yield hit a one-year high Friday morning at 4.59 percent and then hovered near 4.50 percent late Friday afternoon. After the closing bell, the note's yield slipped to 4.41 percent.

Overseas, Japan's Nikkei stock average finished 0.5 percent higher Friday. In Europe, France's CAC-40 declined 1.3 percent, Britain's FTSE 100 lost 1.4 percent and Germany's DAX index fell 1.4 percent.

Reuters and The Associated Press contributed to this report.