Stocks pull back after another decline in jobs

NEW YORK -- Wall Street extended its decline Friday after readings on jobs, manufacturing and construction indicated that businesses and workers still face a tough U.S. economy.

A massive loss at General Motors Corp. also gave investors reason to trade cautiously.

Friday's economic reports were not as poor as many economists had anticipated, but they were nonetheless gloomy. The Labor Department said jobs fell for the seventh straight month in July and the unemployment rate rose to 5.7 percent. The report arrived after data Thursday showing an unexpected jump in jobless claims.

"It reinforces the idea that we're seeing a steady, but not dramatic, decline in employment, which is likely to last for some time," said Michael Sheldon, chief market strategist at RDM Financial Group in Westport, Conn.

The Commerce Department also reported Friday that building activity declined in June, while the Institute for Supply Management said manufacturing activity was flat. Given Thursday's disappointing report on gross domestic product growth, Wall Street is becoming more certain that the United States is in a recession -- and one that could be prolonged. U.S. recessions since World War I have lasted about 10 months, on average, but have ranged from as little as six months to as long as 16 months, Sheldon said.

The flagging economy has sapped consumers' ability to spend freely, which in turn is hurting profits at many big companies. GM said it lost $15.5 billion in the second quarter, more than analysts predicted and the automaker's third-worst loss in history.

In midafternoon trading, the Dow Jones industrial average fell 66.27, or 0.58 percent, to 11,311.75.

Broader stock indicators also lost ground. The Standard & Poor's 500 index fell 8.11, or 0.64 percent, to 1,259.27, and the Nasdaq composite index fell 15.17, or 0.65 percent, to 2,310.38.

Declining issues narrowly outnumbered advancers on the New York Stock Exchange, where volume came to 791.1 million shares.

Light, sweet crude rose 93 cents to $125.01 a barrel on the New York Mercantile Exchange, after shooting up as high as $128.60.

Bond prices were little changed. The yield on the benchmark 10-year Treasury note, which moves opposite its price, was at 3.95 percent, the same as late Thursday. The dollar was mixed against other major currencies, while gold prices fell.

Shares of GM, one of the Dow industrials, gave up 55 cents, or 5 percent, to $10.52 after posting its quarterly loss.

Another drag on the stock market was Nortel Networks Corp. The Canadian telecommunications equipment maker reported a wider second-quarter loss, and its stock fell $1.12, or nearly 15 percent, to $6.52.

Overall, companies' quarterly results have been surpassing Wall Street's forecasts. And beyond financial and consumer discretionary sectors, corporate earnings have been increasing.

"There is some room for optimism on the corporate profit front," Sheldon said. "But a lot will depend on consumers and energy prices for the remainder of the year."

A few pharmaceutical stocks suffered sell-offs on Friday. Biogen Idec Inc. and Elan Corp. PLC fell due to safety concerns related to multiple sclerosis therapy Tysabri. Biogen dropped $18.02, or nearly 26 percent, to $51.74, and Elan tumbled $9.08, or 45 percent, to $10.97.

Financial stocks were mixed. Investors have been cautiously optimistic that banks and other financial services companies, while still losing money on their hefty investments in troubled debt, are starting to clean up their books.

Gainers included JPMorgan Chase & Co., up 10 cents at $40.74, Lehman Brothers Holdings Inc., up 46 cents at $17.80, and American International Group, up 55 cents at $26.60. Merrill Lynch & Co., down 45 cents at $26.20, was among the decliners.

Big gainers Friday included bond insurers Ambac Financial Group Inc. and MBIA Inc. Ambac said it agreed to pay $850 million to settle one of its largest exposures to risky debt instruments called collateralized debt obligations. Ambac rose $1.01, or 40 percent, to $3.53; MBIA rose rose $1.32, or 22 percent, to $7.25.

The Russell 2000 index of smaller companies rose 1.34, or 0.19 percent, to 715.86.

Overseas, Japan's Nikkei stock average fell 0.14 percent. Britain's FTSE 100 fell 1.06 percent, Germany's DAX index declined 1.28 percent, and France's CAC-40 fell 1.78 percent.