Stocks mixed on jobs report, debt worries

NEW YORK -- The stock market headed toward its fourth straight weekly drop Friday on another series of troubling signals about the global economy. The Dow Jones industrial average fell five points, after being down as much as 167.

The erratic trading came amid the latest signs that several weak European governments will have trouble getting their massive deficits under control. The Labor Department, meanwhile, offered only scant hope of improvement in the jobs market in its closely watched monthly report.

"Clearly we've entered the worry, fear camp," said Rob Lutts, president and chief investment office at Cabot Money Management. "It's a very fragile investor psychology today. It doesn't take much ... to send them running for the hills."

The market pulled off its lows in the last hour of trading as the dollar came of its highs. A rising dollar hurts commodity prices, which become more expensive for foreign buyers when the dollar climbs.

The Federal Reserve also said during afternoon trading that consumers borrowed less for an 11th straight month in December but that total borrowing fell far less than expected. The drop of $1.8 billion was less than the decline of $9 billion analysts had expected. That fueled hopes that consumer spending will increase.

But for the second straight day, other economic news was unsettling. On Thursday, the Dow fell 268 on growing worries about the global economy.

The U.S. unemployment rate unexpectedly fell in January to 9.7 percent from 10 percent, the government reported, even though analysts expected an uptick. At the same time, however, employers cut 20,000 jobs, more than the 5,000 economists expected, according to Thomson Reuters. The two numbers are calculated from different surveys.

Timothy Speiss, head of Eisner LLP's Personal Wealth Advisors group, said the improving unemployment rate was a good sign, but investors are well aware that the problems in the economy that have stocks falling in recent weeks are still there.

"There will be excitement, relief about the number," Speiss said. "But we need to keep going."

The jobs report came as more troubling news emerged in Europe that Portugal and other weak economies were falling behind in their efforts to control their deficits.

Portugal's opposition parties defeated a government austerity plan Friday and passed their own bill allowing the country's autonomous regions to rack up even more debt. That raised new questions about European countries' ability to control their swollen budget deficits, which are undermining faith in the region's euro currency. Greece and Spain are also grappling with massive budget deficits.

The worries about Europe are another bullet point for investors who for weeks have been concerned about China's efforts to keep growth in check as well as plans in Washington to place more restrictions on big banks.

In late afternoon trading, the Dow fell 5.44, or 0.1 percent, to 9,996.74. The Dow is down 729 points, or 6.8 percent, since closing at a 15-month high of 10,725.43 on Jan. 19.

The broader Standard & Poor's 500 index fell 1.31, or 0.1 percent, to 1,061.80, while the Nasdaq composite index rose 8.50, or 0.4 percent, to 2,133.93.

Three stocks fell for every two that rose on the New York Stock Exchange, where volume came to 1.2 billion shares, compared with 1.1 billion traded at the same point Thursday.

The Labor Department revised some of its past statistics lower, painting a grimmer picture about how bad the economy was hurt during the recession. The economy has shed 8.4 million jobs since the downturn began in December 2007, compared with a previous estimate of 7.2 million.

December job cuts were also revised for the worse. In the final month of 2009, employers cut 150,000 jobs, not the 85,000 previously reported.

Analysts say there were some encouraging signs in the report. The number of average hours worked and hourly pay both improved, as did the number of employers adding temporary workers. The hiring of temporary employees usually precedes companies adding permanent jobs during a recovery.

The "underemployment" rate, which includes part-time workers looking for full-time work and discouraged workers, fell to 16.5 percent from 17.3 percent. Some analysts say that is a better representation of the job market than the unemployment rate.

"Jobs may not be a plus yet," said John Merrill, chief investment officer at Tanglewood Wealth Management. But, he added: "the trend is unmistakable. It's clearly positive."

Nicholas Colas, chief market strategist at ConvergEx Group, said the worries about European debt are exacerbated because European Central Bank head Jean-Claude Trichet has not shown that he has the situation under control.

"It's that void that concerns people," Colas said. Investors worry that if regulators can't help stem problems now, they could end up snowballing and becoming an every bigger spread elsewhere, he said.

Stocks fell sharply in late January after China said it would rein in loose bank lending standards to cool its economy and avoid speculative bubbles. President Barack Obama's calls for tighter regulations on U.S. banks contributed to the slide.

Overseas markets fell again Friday following the global rout the day before.

Japan's Nikkei stock average fell 2.9 percent, while Hong Kong's Hang Seng tumbled 3.3 percent. Britain's FTSE 100 fell 1.5 percent, Germany's DAX index dropped 1.5 percent, and France's CAC-40 tumbled 3.4 percent.

Demand for safer investments rose as stocks tumbled. The dollar rose again Friday, while Treasury bond prices inched higher. The yield on the benchmark 10-year Treasury note, which moves opposite to its price, fell to 3.57 percent from 3.61 percent.

Gold prices fell. Oil fell $1.95 to settle at $71.19 a barrel on the New York Mercantile Exchange.

The Russell 2000 index of smaller companies rose 2.04, or 0.4 percent, to 591.72.