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Stocks fall following disappointing jobs report

STOCKS posted modest losses yesterday after a disappointing monthly jobs report brought fresh concerns that a recovery in the troubled labor market may be a long way off.

The Dow Jones industrial average fell for a fourth straight day, losing nearly 22 points a day after tumbling 203 points following weak reports on manufacturing and weekly claims for jobless benefits.

The latest poor report came from the Labor Department, which said employers cut 263,000 jobs last month. That was more than the 201,000 cut in August and worse than the 180,000 economists were expecting. The unemployment rate rose to 9.8 percent, in line with forecasts.

"There's been a lot of talk particularly in the last couple of months that we're seeing a turnaround in unemployment, and obviously that's not the case," said Dan Cook, senior market analyst at IG Markets in Chicago.

Meanwhile, a surprise drop in factory orders extended the recent string of disappointing economic readings. The Commerce Department said factory orders fell 0.8 percent in August following a 1.4 percent gain in July. Analysts had been expecting a 0.7 percent increase.

The market's optimism has been tested this week by a number of economic indicators that have either weakened or fallen short of expectations, a disappointment after several months of hopeful signs on key industries like housing and manufacturing. That has led investors to question whether the 50 percent surge in stocks over the past six months can be sustained.

With nerves running high, stocks have fallen in seven of the last eight days. The Dow Jones industrials have pulled back about 4.3 percent since coming within 82 points of the 10,000 level last week.

"People have had a long, hard week," said Bruce Shalett, managing partner at Wynston Hill Capital in New York.

Many found the relatively calm response to the jobs report encouraging, taking it as a sign that there are still investors willing to use the dips to pick up stocks they consider cheap.

"Pullbacks are going to constantly be used as opportunities to get into the market," said Hank Smith, chief investment officer of equity at Haverford Investments in Radnor, Pennsylvania.

The Dow fell 21.61, or 0.2 percent, to 9,487.67, after falling as much as 79 points. The Standard & Poor's 500 index fell 4.64, or 0.5 percent, to 1,025.21, and the Nasdaq composite index fell 9.37, or 0.5 percent, to 2,048.11.

For the week, the Dow and the S&P 500 index each lost 1.8 percent, while the Nasdaq fell 2 percent.

Two stocks fell for every one that rose on the New York Stock Exchange, where volume came to 1.4 billion shares compared with 1.6 billion Thursday.

Stocks are coming off a banner third quarter. Both the Dow and the S&P 500 index gained 15 percent in the July-September period. It was the Dow's best quarter since 1998.

The fourth quarter may not be as stellar. Analysts expect the market to drift over the next couple of weeks as investors await quarterly earnings reports from companies and their forecasts on business activity in the coming months. The last meaningful pullback in the market since the rally began in March, in which the major indexes lost about 7 percent, came during the four weeks leading up to second-quarter reports this summer.

"October is shaping up to be a challenging month for investors," said Brent McQuiston, a vice president at WealthTrust-Arizona.

Strong earnings could help offset any growing concerns about an economic recovery and stabilize the market, he said, but solid revenue growth is what is needed to put the market on "firm footing."

In the meantime, the market will get reports on the service sector, retail sales and wholesale trade inventories next week.

Yields on long-term Treasurys moved off their lowest levels since the spring. The yield on the benchmark 10-year Treasury note, which moves opposite its price, rose to 3.22 percent from 3.18 percent late Thursday.

In other trading, the Russell 2000 index of smaller companies fell 3.55, or 0.6 percent, to 580.20.


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