Jobs Number Takes Stock Market Down

The Nasdaq gives up 26 points, while the Dow falls 93.
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Updated from 4:06 p.m. EDT

Tech stocks led the market lower Friday as oil spiked and the Labor Department reported slower jobs growth, raising questions about the economy. The rally in the bond market hit a wall when yields touched 14-month lows and traders got defensive ahead of the weekend.

The

Dow Jones Industrial Average

lost 92.52 points, or 0.88%, to 10,460.97, while the

S&P 500

lost 8.27 points, or 0.69%, to 1196.02. The

Nasdaq Composite

shed 26.37 points, or 1.26%, to 2071.43. The 10-year Treasury fell 22/32 in price to yield 3.98%. Earlier, the yield on the 10-year had dropped to 3.82%. The dollar fell against the euro and the yen.

"Today was one of the more volatile days we've seen in a while, particularly in bonds," said Barry Hyman, equity market strategist with Ehrenkrantz King Nussbaum. "The market has been celebrating lower interest rates and the

Fed

possibly ending

rate tightening sooner. The numbers this morning supported that, and things looked OK. The market picked up on the trend that the economy may be slowing worse than expectations. You're not going to continue to keep going up in the same magnitude, and it makes sense to expect selling."

About 1.60 billion shares changed hands on the

New York Stock Exchange

. Decliners beat advancers by a 9-to-7 margin. Volume on the Nasdaq was 1.63 billion shares, with decliners outpacing advancers 5 to 3.

"Momentum selling continued after the jobs report this morning," says Brian Williamson, an equity trader with Boston Company Asset Management. "The selling was even greater after being forced by higher crude prices. All of this gives investors reasons to take some profits. The selling has been so dramatic today; almost everything seems for sale."

For the week, the Dow ended lower by 0.77%, the S&P 500 was off 0.23%, and the Nasdaq fell by about 0.2%.

The day's biggest story was the jobs data, with the Labor Department reporting that nonfarm payrolls increased by 78,000 in May, far lower than economists' expectations of 180,000 new jobs. May's growth was the lowest job expansion since August 2003. The jobless rate dipped to 5.1% from 5.2% the previous month.

"In the short term, these data will give comfort to those who believe the Fed will be done with one or two more increases in fed funds," says Ian Shepherdson, chief economist with High Frequency Economics. "We are not surprised to see Treasury notes rallying in the wake of the data. But we remain of the view that the trend in payrolls will be strong enough to keep the unemployment rate gradually heading down and wage pressures heading up. Greenspan faces a dilemma; we think he keeps hiking."

Also, the Institute for Supply Management's nonmanufacturing services index for May declined to 58.5. Economists expected the level to fall to 60.5 from April's 61.7 reading. Although the index did fall, a level above 50 marks growth in nonmanufacturing activity.

"We're in a very strong rally phase for the economy," says Ken Tower, chief market analyst with CyberTrader. "There is money on the sidelines that wants to come into the market. In this type of rally, this money will take any excuse to go to action. People are trying to find the one silver lining in order to put their cash to work."

Oil prices were higher, with the July crude contract closing $1.40 higher to $55.03 a barrel in Nymex floor trading. Crude posted an increase of 6.1% on the week.

Stronger sectors Friday included energy, gold and steel. Technology was weaker, along with materials, semiconductors, biotech and airlines.

The tech-heavy Nasdaq was weighed down by

Apple Computer

(AAPL) - Get Report

, which finished 4.5% lower after the company agreed to extend warranties and issue credits to customers who experienced battery problems with older versions of the company's iPod music player. Apple was off $1.80 to $38.24.

Leading the corporate news was an announcement that

L-3 Communications

(LLL) - Get Report

agreed to acquire

Titan

(TTN)

for $23.10 a share. The total value of the transaction, including L-3's assumption of Titan's debt, will be around $2.65 billion. Titan shares fell 32 cents, or 1.4%, to $22.47, while L-3 added $3.12, or 4.4%, to $74.15.

Cognos

(COGN)

trimmed its fiscal first-quarter sales and earnings guidance Friday, saying it closed fewer large deals in the quarter. The business software maker expects to earn 21 cents to 23 cents a share on sales of $198 million to $200 million in the quarter. Analysts had been forecasting earnings of 25 cents a share on sales of $207.8 million, according to Thomson First Call. Cognos lost $2.81, or 7.5%, to $34.40.

Retailer

bebe stores

(BEBE)

confirmed a 3-for-2 stock split effective after the close of trading Friday, as well as an increase in its quarterly dividend to 4 cents a share from 2.2 cents a share. The dividend is payable on July 1 to shareholders of record on June 20. bebe was lower by $1.03, or 2.4%, to close at $41.54.

Computer services company

Navarre

(NAVR)

, which said earlier this week that it would postpone the release of its fourth-quarter and fiscal year 2005 results, said late Thursday that it will restate results for several reporting periods starting in 2004 to correct accounting related to certain benefits compensation for its chief executive. Shares dipped, down 16 cents, or 1.9%, to $8.08.

In brokerage action, both J.P. Morgan and UBS lifted earnings and revenue estimates for

Intel

(INTC) - Get Report

. J.P. Morgan cited stronger-than-expected order rates when raising its second-quarter EPS a penny to 28 cents and 2005 earnings to $1.39 from its earlier estimate of $1.36. UBS boosted its second-quarter earnings estimate to 29 cents a share and 2005 EPS to $1.37. Still, Intel lost 26 cents, or 0.9%, to $27.33.

General Motors

(GM) - Get Report

and

Ford

(F) - Get Report

both fell more than 1% after Ward Transportation Research initiated coverage of both stocks with a sell rating. The research firm feels that news around both companies will likely remain negative. GM was down 31 cents, or 1%, to close at $30.93. Ford fell 37 cents, or 3.6%, to $9.90.

Merrill Lynch downgraded electric utility company

Ameren

(AEE) - Get Report

to neutral from buy, citing valuation. Ameren, which supplies power to Missouri and Illinois, has benefited from both falling bond yields and higher energy prices, which the brokerage believes will not continue. Shares lost 26 cents, or 0.5%, to $54.81.

Overseas shares were mixed. London's FTSE 100 was down 0.1% at 4999, and Germany's Xetra DAX was off 0.5% to 4510. Japan's Nikkei rose 0.2% to 11,300, and in Hong Kong the Hang Seng was flat at 13,818.

To view Gregg Greenberg's video take on today's market, click here

.