Updated from 12:45 p.m. EDT

With Wall Street revising its view on the pace of interest-rate tightening, Friday's anemic jobs number sparked a minirally in a handful of mortgage banking stocks. Most of the momentum petered out by day's end, however, as investors reconsidered the implications of an economic downturn on capital providers.

A smattering of mortgage-related stocks managed to end a higher:

Countrywide Financial

(CFC)

, up 2 cents to $66.97;

Doral Financial

(DRL)

, up 74 cents to $39.16;

Washington Mutual

(WM) - Get Report

, up 1 cent to $38.01;

Freddie Mac

(FRE)

, up 64 cents to $65.07; and

Bank of America

(BAC) - Get Report

, up 1 cent to $83.91.

Meanwhile, the action in the broader market was dismal. The

Dow Jones Industrial Average

closed down 148 points to 9815, the

Nasdaq

fell 45 points to 1776 and the

S&P 500

dropped 17 points to 1064.

Banks made a broader run at gains earlier before falling back. In Wall Street's often twisted logic, news that the economy produced just 32,000 new jobs in July, nearly 200,000 fewer than Wall Street estimates, was initially received as manna from heaven by bank investors. To traders, bad news on the economy is good news for financial stocks, because it means the

Federal Reserve

will now have to go slow on raising interest rates, and that means more borrowing by homeowners and consumers.

Indeed, the poor jobs number already led some to speculation that the Fed would hold the line on raising rates when it meets next week, or signal a more hesitant approach towards future rate hikes. Before the release of the July jobs report, just about everyone on Wall Street was saying another quarter-point interest rate increase was a certainty, and most were predicting the Fed would push rates up to 2% by year's end.

Bond investors bought the notion that the Fed will go slow in tightening the money supply. The yield on the benchmark 10-year Treasury fell 19 basis points to 4.23%, an indication traders see the Fed taking a go-slow approach in the coming months.

Earlier this year, financial stocks and the bond market took a pounding when Fed Chairman Alan Greenspan began telegraphing an end to the Fed's easy money policy. The Philadelphia KBW Bank Index, which had been up 5% in early March, is now down 4% for the year.

But investors should think carefully before piling into bank stocks as a safe harbor.

For starters, it's unlikely the Fed will leave rates alone when it meets in Washington on Tuesday. When he last testified on Capitol Hill in July, Alan Greenspan didn't sound like a man worried about a faltering economic expansion. He told Congress that the "softness" in some of the economic numbers in June was nothing to fret about and "should prove short-lived."

At times, Greenspan sounded downright giddy, stating that "the expansion has become more broad-based and has produced notable gains in employment." Given that rosy view, don't look for Greenspan and Co. to change course all of sudden.

But even if the Fed were to do a 180-degree policy turn, a return to easy money might not prove the elixir for the financials and the economy that it often has been during the past three years. With fed funds at 1.25%, interest rates remain well below the levels seen during the mid-1990s, when the economy was roaring and producing millions of new jobs each year.

With consumer debt at record levels and the nation already experiencing a record mortgage refinancing boom, there are just so many times the banks can keep going back to the same well to juice earnings. If another economic slowdown is in the making, consumer fatigue seems inevitable after all the borrowing that occurred to help pull the country out of the last recession.

"The consumer is pretty well tapped," says David Hendler, a financial services analyst with CreditSights.

More worrisome, a decline in interest rates is not going to get businesses to start borrowing, if they didn't do it during a period when the economy appeared to be firing on all cylinders. The continued lack of activity in the commercial lending market is more than just baffling; it could be an indication the economy is not as strong as many have thought.

"Stock-picking is very difficult amongst banks right now," says Michael Stead, a portfolio manager with Wells Capital Management, who has doubts about the underlying strength of the economy.

In fact, Stead says there are more things he doesn't like than likes in the financial sector. In particular, he's shying away from brokers, big money-center banks and thrifts. He is, however, eyeing some smaller community banks with market-caps around $250 million. But he's been awfully selective.