Stocks fall on service sector, jobs data By TIM PARADIS, AP Business Writer

Stocks fall on service sector, jobs data By TIM PARADIS, AP Business Writer
3 minutes ago



NEW YORK - Stocks fell Friday as Wall Street grappled with weaker-than-expected economic readings and continued concerns about the credit markets.

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Wall Street, coming off two straight days of triple-digit gains in the Dow Jones industrials, turned down as a trade group reported that the nation's service sector grew at a slower pace in July and the government reported that jobs growth was slower than expected last month.

Credit concerns, which have dogged investors for months and have roiled markets since last week, arose again Friday. Standard & Poor's Ratings Services said it might downgrade the debt rating at Bear Stearns Cos. because of the investment bank's exposure to the distressed mortgage and corporate buyout markets. The stock at times fell to levels not seen since November 2005 and recently traded down $7.14, or 6.2 percent, to $108.34.

"I think there is a tremendous amount of uncertainty with regard to the credit markets and how the situation will ultimately settle," said Mile Malone, trading analyst at Cowen & Co.

Investors, still uncertain about the effect of rising subprime mortgage defaults on the broader economy, have regarded the stable job market and consumer spending as signs the economy might hold up despite a tighter lending climate. That's because people with steady paychecks are more likely to keep spending — and pay back their debt. At the same time, some pullback in employment might ease some concerns about wage inflation.

In late morning trading, the Dow Jones industrial average fell 87.06, or 0.65 percent, to 13,376.27. At times, the Dow fell more than 100 points.

Broader stock indicators fell. The Standard & Poor's 500 index dropped 11.90, or 0.81 percent, to 1,460.30, and the Nasdaq composite index fell 20.65, or 0.80 percent, to 2,555.33.

The stock market made late-day surges both Wednesday and Thursday, but trading has been nervous and wavering. Investors remain worried that problems in subprime mortgages — mortgages to people with poor credit histories — will force lenders to make credit less available. When people and companies can't borrow money, the economy tends to slow down.

Bonds rose Friday after the economic reports. The 10-year Treasury note's yield fell to 4.72 percent from 4.77 percent late Thursday.

In economic news, the Institute for Supply Management said its non-manufacturing index for July slipped to 55.8 from 60.7 in June. Wall Street had expected a reading of 59, according to Thomson Financial/IFR.

Some investors also appeared concerned over a Labor Department report that found nonfarm payrolls rose 92,000 last month, less than the 132,000 jobs created in June and below the average forecast of about 135,000. Also, unemployment ticked up to 4.6 percent — a six-month high — from 4.5 percent in June. Still, overall unemployment remains low, analysts noted.

"I think the ISM and the jobs numbers are going to accelerate the general consensus view that maybe the economy is slower than anticipated," said Subodh Kumar, global investment strategist at Subodh Kumar & Assoc.

"The market has become very much driven from data point to data point because of uncertainty of a number of issues," he said, citing unease over credit, oil prices, and a weak dollar.

In corporate news, lender American Home Mortgage Investment Corp. confirmed late Thursday it has stopped taking mortgage applications and is laying off most of its 7,000 staffers. American Home dropped 68 cents, or 47 percent, to 77 cents.

Procter & Gamble Co., one of the 30 Dow components, reported a rise in quarterly profit that beat expectations and announced a share buyback. However, P&G fell 62 cents to $62.68 after its profit forecasts for the remainder of the year came in below what Wall Street had been expecting.

Toyota, poised to overtake General Motors Corp. this year as the world's biggest automaker, said profit in the most recent quarter soared 32.3 percent to a record high thanks to strong overseas sales and a weaker yen. Toyota's U.S. shares rose 91 cents to $119.50.

Crude oil futures fell 92 cents to $75.94 per barrel on the New York Mercantile Exchange. Crude closed at a record $78.21 a barrel on Tuesday.

The dollar fell against most other major currencies. Gold prices rose.

In Asian trading, Japan's Nikkei stock average fell 0.03 percent, Hong Kong's Hang Seng index rose 0.4 percent, and China's Shanghai Composite Index rose 3.5 percent.

In European trading, Britain's FTSE 100 fell 0.99 percent, Germany's DAX index fell 1.13 percent, and France's CAC-40 fell 1.49 percent.

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