Bad employment numbers were more than investors could handle Friday as the selling that plagued speculative stocks all week moved into established names.

There was optimism on the floor after a 192-point rout Thursday, as traders believed the market was oversold. But the mood quickly turned sour when the government said unemployment reached a four-year high in August, and was exacerbated by a profit warning from the parent of American Airlines. The twin shocks sent investors on a mad dash for cash.

Blue-chips took it on the chin: The

Dow Jones Industrial Average

fell 234.99 points, or 2.39%, to 9605.85, while the

S&P 500

dropped 20.62 points, or 1.86%, to 1085.78. The

Nasdaq Composite

, which had already fallen about 5% on the week, was bolstered by reasonably good news from

(INTC) - Get Report

, and fell just 18 points, or 1%, to 1687.70.

The selling takes the Dow and Nasdaq close to the lows they hit before rallying in early April. The Nasdaq is 48.9 points above its low of 1638.8, hit on April 4, while the Dow is 216.37 points above its of 9389.48, reached on March 22. The S&P, meanwhile, fell through its support and is now trading at its lowest level since 1998.

Over the past months, investors have become increasingly skittish about the market. Weekly mutual fund money flow data shows redemptions totaled $1.74 billion for the week ended Sept. 5. In the year-ago period, mutual funds saw $608 million come in to their coffers.

"It looks like broad-based mutual fund redemptions took place today," said Matt Johnson, head of stock trading at Lehman Brothers. "Yesterday, it was tech's turn. Today it's economically sensitive stocks."

The Nasdaq traded down each day this week, as investors worried that a weak economy could wreak havoc on technology stocks.

Motorola

(MOT)

said Thursday that it expects third-quarter sales to be flat. The company also announced plans to cut another 2,000 jobs.

Today's Labor Department report has investors worried about consumer spending, once counted on to give the weakening economy support. The jobless rate rose to 4.9% in August from 4.5% in July, the Labor Department said. Economists polled by Reuters had expected it to edge up to 4.6%.

"The unemployment rate has got to raise fears about consumer spending," said Christopher Low, chief economist at First Tennessee Capital Markets. He adds that Americans are more likely to spend their tax rebates on paying down their debt than on consumption.

Retail and manufacturing components fell the hardest today.

Home Depot

(HD) - Get Report

fell $2.60, or 5.97%, to $40.95,

General Motors

(GM) - Get Report

dropped $1.87, or 3.51%, to $51.40,

United Technologies

lost $2.12, or 3.13%, to $65.64, and

3M

(MMM) - Get Report

shed $3.12, or 3%, to $100.78.

Manufacturing employment was hardest hit in August, with the sector losing 141,000 jobs, nearly twice as many as in July. Nearly every manufacturing industry lost jobs, with industrial machinery, losing 25,000, and electrical equipment, dropping 19,000, posting the steepest declines.

That data wiped out any optimism that had been created earlier in the week when a purchasing managers' report suggested the sector was finally done contracting. Many of the names that were boosted on that news more than retraced their gains on Friday.

Shares of Dow component

Boeing

(BA) - Get Report

sank $3.66, or 7.5%, to $45.18 after Morgan Stanley cut its rating to neutral from outperform, saying jet deliveries would fall below expectations in 2002 and 2003.

Money was lured back into the market after the Dow took its initial plummet, driving the market up about 100 points in what traders called a sucker's rally. "Unaware investors bought stocks," said Doug Myers, vice president of trading at IJL Wachovia. "But it was more the result of an absence of selling than of buying."

"There is still some fat remaining in the marketplace," said Myers. "We haven't seen companies reduce their workforces, and then come back and say they cut too deep." Today, investors seemed to find excess on the Dow. The blue-chip index currently trades at a price-to-earnings multiple of 21.9.

The S&P 500 futures contract was lately trading at 1082.4, its lowest level since mid-March. The Nasdaq 100 futures contract fell to 1340, its worst rank since October 1998. If, on Monday morning, futures are trading higher than the cash S&P 500, institutions most likely will sell the futures and buy the underlying stocks, giving the market a boost at the open. If, on the other hand, futures aren't trading much higher than the S&P 500's close, stocks probably will go down.

With the selloff, Wall Street snapped out of its summer doldrums. The question on many observers' minds Friday, however, was how much attention the rest of the country was paying, and what will happen when mutual fund balances are examined for the first time on Monday morning.