A three-day rally faded on Wall Street Friday after a mixed jobs report and credit-rating cuts for Italy and Spain.
Indexes drifted between gains and losses in the morning, then turned lower after the Fitch agency cut Spain and Italy's credit ratings, saying they are more likely to default because of the spreading debt crisis in Europe.
The Dow Jones industrial average fell 34 points, or 0.3 percent, to 11,089 at 12:45 p.m. Eastern time. Financial stocks led the Dow lower.
Broader indexes fell even more. The Standard & Poor's 500 index lost 10, or 0.9 percent, to 1,155. The Nasdaq composite index fell 32, or 1.3 percent, to 2,474.
U.S. employers added 103,000 jobs last month, about double what economists had expected, the Labor Department said earlier Friday. The government also said more jobs were added in July and August than previously reported. Economists said the report countered short-term fears that the U.S. might be entering another recession. Yet it offered few signs that strong growth will return soon.
Traders bought companies expected to do well even in a slow economy. Utilities, consumer staples and telecommunications rose the most of the S&P's 10 industry groups.
The gains in hiring weren't enough to lower the unemployment rate, which remained steady at 9.1 percent for the third straight month. Traders watch the employment report closely because it provides the first significant snapshot of the previous month's economic performance and clues to the broader outlook for the U.S. economy.
The report led traders to sell ultra-safe investments that earn small returns such as U.S. Treasurys. Minutes after the report came out, the yield on the 10-year Treasury note rose to 2.11 percent from 1.98 percent. It fell back to 2.06 percent after the rating cuts renewed some fears about Europe.
The monthly jobs report is one of the few pieces of data powerful enough to overshadow traders' fears about Europe's festering debt crisis. Markets gyrated this summer as concerns intensified about a default by Greece. Many analysts now believe a default is unavoidable, and question whether Europe can prevent it from causing financial markets to seize up.
Short-term traders have reacted strongly to minor European developments, rumors and speculation. The Dow has closed up or down more than 100 points for nine straight trading days, the longest such streak since November 2008, in the middle of the financial crisis. The Dow soared 468 points, or 4.4 percent, Tuesday through Thursday.
Makers of high-tech lap equipment skidded after Illumina Inc. withdrew its annual earnings forecast, saying demand from government and academic customers had decreased in the slowing economy. Illumina lost one-third of its value. PerkinElmer Inc. plunged 9 percent; Thermo Fisher Inc. and Agilent Technologies Inc. lost 7 percent.
Sprint Nextel Inc. plunged 8 percent after the company said it needs to borrow money to build out a new high-speed data network. It had risen sharply earlier in the day after the company said its new deal to sell Apple Inc.'s iPhone will add to its revenue in the coming quarters.
Clearwire Corp. plummeted 26 percent after Sprint said it would stop selling phones that work on the company's network at the end of next year. Sprint is building its own high-speed wireless network.
Bank of America Corp. plunged 5 percent, the most in the Dow, after weeks of sharp movements caused by concerns about legal costs the bank faces over shoddy mortgages that it sold.
J.P. Morgan Chase & Co. lost 3 percent. Financial stocks have been extremely volatile because of fears that Europe's problems could spill over in the U.S. banking industry.