Updated from 4:08 p.m. EDT

Stocks closed the week with their second consecutive dive as a spate of bad economic news and a weak outlook from Dow component Disney ( DIS) contributed to nervousness about the overall earnings picture.

The Dow Jones Industrial Average with a loss of 193 points, or 2.3%, to 8313. The Nasdaq fell 32 points, or 2.5%, to 1248, and the S&P 500 was off 21, or 2.4%, at 864. The Dow had been lower by more than 300 points late in the day before erasing some of that loss.

For the week, the Dow gained about 49 points while the Nasdaq fell about 14 points.

Investors were discouraged before trading even opened after receiving Disney's weak report and lukewarm employment data from the government, the latest in a string of economic reports this week that have made many observers question the strength of the recovery.

Decliners outpaced advancers 5-3 on both the Nasdaq and the New York Stock Exchange and volume was moderate at 1.5 billion shares on the NYSE and 1.4 billion on Nasdaq. Semiconductors, banks, retailers and transports showed the most weakness. The Philadelphia Semiconductor Index ended down 3.3%, the Dow Jones Retail Index was down 3.6%, and Transportation Index was off 4.6%.

Financials were also weaker. Dow components Citgroup ( C) and J.P. Morgan ( JPM) lost more than 4%. Fellow Dow members Caterpillar ( CAT) and General Motors ( GM) also finished substantially lower. Gold and drug stocks turned in a solid performance.

Two key economic reports were released before the opening bell. First, the Labor Department said 6,000 workers were added to payrolls in July, fewer than expected, suggesting that the overall economy remains stagnant. The biggest loss in jobs came from the construction and government sectors.

The unemployment rate came in at 5.9%, matching economists' forecasts and unchanged from June. The average workweek declined to 34 hours in July from 34.3 the previous month, its lowest level since last October. That's considered a bearish sign for labor. Meanwhile, factory overtime hours fell to an average 4.1 hours in July from 4.3 a month earlier.

Separately, the Commerce Department said personal income rose 0.6% June, compared with a 0.4% increase in May. Economists, on average, were expecting a 0.5% increase. Consumer spending rose 0.5%, slightly below the consensus estimate, but up from May.

With earnings season slowing down, investors had only a handful of quarterly announcements to digest Friday.

Entertainment giant and theme park operator Disney reported a steep drop in third-quarter earnings, citing weaker-than-expected results from its movie business and poor ratings at its ABC television network. The company posted net income of $364 million, or 18 cents a share, compared with $527 million, or 25 cents a share, in the year-ago period.

The company also warned that a weak theme park business will likely hurt its current quarter, but Disney projected solid earnings growth for 2003. Shares fell 9% to $15.31.

Health insurance provider Cigna ( CI) reported a rise in second-quarter earnings as higher premiums offset rising medical expenses. The company posted an operating profit of $279 million, or $1.95 a share, a penny shy of Wall Street's estimates.

The Securities and Exchange Commission expanded its investigation of AOL Time Warner ( AOL). The agency is now looking into the media titan's former relationship with software company PurchasePro ( PPRO), according to the Washington Post. AOL's shares slipped 6.9% to $10.25.

Debt-ridden energy traders Williams Cos. ( WMB) and Dynegy ( DYN) were under considerable pressure, sinking 4% and 20%, respectively, as the companies search for ways to stay afloat in the wake of a round-trip trading scandal that has punished the entire sector.

U.S. Treasury issues were higher. The 10-year note was up 26/32 at 104 18/32, yielding 4.29%. The long bond was up 1 15/32 to 102 13/32 and yielding 5.21%. The yield on the two-year note, 2%, was an all-time low.

In Europe, London's FTSE 100 rose 0.8% to 4076, while Germany's Xetra DAX was down 2% at 3532. Japan's Nikkei 225 fell 0.9% to 9710, and Hong Kong's Hang Seng closed down 1.9% to 9992.

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