NEW YORK - Wall Street wrestled with intensifying economic worries Friday, extending sharp losses after a disheartening jobs report and then grudgingly engaging in some mild bargain hunting that gave the market some modest gains. The major indexes ended the week with big declines, a sign that investors, who not long ago expected the economy to improve, are now growing increasingly discouraged.
Stocks initially fell after the Labor Department reported that payrolls shrank more than predicted last month and that the unemployment rate reached a five-year high. But stocks that had been pounded lower, including a huge drop on Thursday, were suddenly more attractive to investors willing to make some bets.
The government said payrolls shrank by 84,000 last month, more than the 75,000 economists predicted, and higher than the 51,000 jobs lost in July. The unemployment rate rose to a five-year high of 6.1 percent from 5.7 percent.
The report confirmed Wall Street's fears that the economy continues to weaken. The nation has lost nearly 550,000 jobs so far this year, eroding investors' hopes for a late-year recovery.
"This was an ugly number that pretty much confirms that our economy continues to trend downward," said Jack Ablin, chief investment officer of Harris Private Bank. "I had thought things were stabilizing, and this just knocks the legs out of any hope of seeing much economic improvement right now."
But investors, with little conviction but willing to make a few bets, picked up some of the stocks hit in a sell-off Thursday, particularly banks and insurers. That lifted the market off its lows, but it was hardly a solid advance.
The Dow Jones industrial average rose 32.73, or 0.29 percent, to 11,220.96; the blue chips had been down 150 points at their lows of the session.
Broader stock ended mixed. The Standard & Poor's 500 index rose 5.48, or 0.44 percent, to 1,242.31, and the Nasdaq composite index fell 3.16, or 0.14 percent, to 2,255.88.
Friday's moves follow a dismal performance on Thursday in which all three major indexes moved back into bear market territory, defined as a 20 percent drop from a recent peak. The Dow plunged more than 340 points in a selloff underpinned by disappointing economic news and lackluster sales reports from retailers; the news drove home to investors that the economy was more troubled than many had thought.
For the week, the Dow lost 2.8 percent, its fourth straight week of losses and the biggest drop since late June. The S&P 500 gave up 3.2 percent and the technology-heavy Nasdaq, home to many stocks seen as riskier than the blue chips, fell 4.7 percent.
Bond prices fell Friday as investors took profits from the gains logged earlier in the week. The yield on the benchmark 10-year Treasury note, which moves opposite its price, rose to 3.69 percent from 3.62 percent late Thursday.
"Since mid-July I think it's become apparent that the global economies have really weakened pretty sharply," said Thomas J. Lee, U.S. equities strategist at JPMorgan Chase & Co. in New York. He said that while investors had been applauding the drop in oil prices since then, there was an assumption that lower commodities prices would hasten a recovery in the U.S. economy. Now, he said, investors are worried that the economy might be weakening even as oil falls.
"It's disinflation coupled with an accelerating downside in the economy. That's not what people were prepared for. I think people were expecting disinflation as an economic recovery was under way," Lee said. "The surge in unemployment today really underscores that fear."
Wall Street again found little comfort from falling oil. Crude dropped to nearly $105 a barrel in Friday's session as the dollar continued to gain on the euro and investors waited to see whether OPEC would move to restrict output next week following a two-month plunge in prices. The Organization of the Petroleum Exporting Countries is scheduled to meet early next week in Vienna and has indicated it may take action to defend the $100-a-barrel level.
Light, sweet crude settled down $1.66 to $106.23 a barrel on the New York Mercantile Exchange.
Among financials carving out advances, Citigroup Inc. rose 77 cents, or 4.2 percent, to $19.07, while Bank of America Corp. rose $1.63, or 5.3 percent, to $32.23. Wachovia Corp. rose $1.22, or 7.9 percent, to $16.75.
Lehman Brothers Holdings Inc. rose $1.03, or 6.8 percent, to $16.20 after a Sandler O'Neill & Co. analyst said he expects the troubled investment bank to survive the credit crisis. The stock has fluctuated on reports that it is hammering out a deal for a cash infusion or buyout.
In the consumer staples sector, smokeless tobacco maker UST Inc. surged following a report from The New York Times that Altria Group Inc. plans to acquire the company. Altria, parent of Marlboro maker Philip Morris USA, dismissed the report as "pure speculation." Nonetheless, UST, the maker of Skoal and Copenhagen brands, jumped $13.55, or 25 percent, to $67.55, while Altria rose 29 cents to $20.95.
Energy names slipped as oil continued its drop. Chevron Corp. declined $1 to $80.22, while ConocoPhillips fell $1.05 to $75.43.
Advancing issues narrowly outnumbered decliners on the New York Stock Exchange, where consolidated volume came to 4.91 billion shares compared with 5.11 billion shares traded Thursday.
The Russell 2000 index of smaller companies rose 0.23, or 0.03 percent, to 718.85.
Investors overseas sent shares sharply lower on concerns about America's effect on global growth.
Japan's Nikkei stock fell 2.75 percent. In Europe, Britain's FTSE 100 ended down 2.26 percent, Germany's DAX index dropped 2.42 percent, and France's CAC-40 shed 2.49 percent.
The Dow Jones industrial average ended the week down 322.59, or 2.79 percent, at 11,220.96. The Standard & Poor's 500 index finished down 40.52, or 3.16 percent, at 1,242.31. The Nasdaq composite index ended the week down 111.64, or 4.72 percent, at 2,255.88.
The Russell 2000 index finished the week down 20.65, or 2.79 percent, at 718.85.
The Dow Jones Wilshire 5000 Composite Index — a free-float weighted index that measures 5,000 U.S. based companies — ended Friday at 12,702.58, down 421.91 points, or 3.21 percent, for the week. A year ago, the index was at 14,846.39.
On the Net:
New York Stock Exchange: http://www.nyse.com
Nasdaq Stock Market: http://www.nasdaq.com