Stocks slipped Friday, but ended off their earlier lows, amid disappointment in the July jobs report. Still, stocks managed to finish solidly higher for the week.
The Dow Jones Industrial Average ended down 21.42 points Friday, or 0.2 percent, to 10,653.56, being down as much as 160 points earlier. For the week, the Dow gained 1.8 percent, representing three consecutive weeks of gains.
Health care, energy and consumer discretionary were the week's best performers. Financials were among the worst.
Chevron finished lower today but had the most positive impact on the Dow this week, rising 3 percent, while American Express was the biggest drag, falling more than 2.5 percent. ExxonMobil had the most positive impact on the S&P, up 4 percent for the week.
All three major indexes are now in positive territory for the year. The S&P 500 ended the week up 1.8 percent, to 1,121.64. The Nasdaq ended the week up 1.5 percent at 2,288.47. The CBOE volatility index, widely considered the best gauge of fear in the market, fell to nearly 22.
U.S. employers cut 131,000 jobs from nonfarm payrolls in July. June payrolls were revised to show 221,000 jobs were lost that month, nearly twice the original estimate. The unemployment rate held steady at 9.5 percent.
Economists had expected to see payrolls drop by 65,000 in July and the unemployment rate to rise to 9.6 percent.
Jobs in the private sector rose by 71,000, after a 31,000 gain in June, while the government lost 202,000 jobs in July. Economists had expected private-sector jobs to increase by 90,000.
"The perception that there is job growth and an economic recovery is underway appears to be a myth," said Todd Schoenberger, managing director at LandColt Trading.
"The foundation for employment growth occurs in promising consumer sentiment and confidence readings — both of which continue to be frighteningly low," Schoenberger said. "Today's number does not initiate a Fed policy move, but the overall trend does."
In other economic news, the Federal Reserve reported U.S. consumer credit outstanding shrank again in June, providing more evidence that consumers don't want to spend. Total outstanding debt fell to $1.34 billion in June, far less than the $5 billion economists surveyed by Reuters expected. In May, credit outstanding shrank to $5.28 billion, less than the $9.15 billion initially reported.
Most corporations have reported second quarter earnings, and 75 percent of these companies have beat expectations. Positive news from corporate America has been offset by a series of weak economic reports, including July jobs figures.
Meanwhile, Goldman Sachs economists cut their forecasts for U.S. economic growth in 2011, saying GDP is likely to average 1.9 percent next year versus a previous forecast of 2.5 percent.
Next Tuesday, the Federal Open Market Committee meets to discuss monetary policy. While policy makers are widely expected to hold rates steady, traders will be watching for whether the Fed will resume buying mortgages and Treasurys.
Goldman said if the Fed starts reinvesting its money, it would be a "baby step" toward renewed unconventional easing.
Earnings were largely mixed across the board: AIG shares advanced after the insurer reported better-than-expected results and said it had started talks on disentangling itself from the government.
Kraft Foods was the biggest gainer on the Dow in today's session, up 2.4 percent, after the company, which makes Kraft Macaroni & Cheese and Maxwell House coffee, reported a higher-than-expected profit Thursday. The food giant also raised its target for cost savings from the acquisition of Cadbury.
Meanwhile, Activision Blizzard tumbled more than 6 percent after the videogame publisher set a forecast for the current quarterthat was below Wall Street's targets and raised fears about its just-released "StarCraft II" title.
Office Depot shares fell 7 percent amid worries about the back-to-school shopping season. This came after rival Staples was downgraded and Office Max lowered its forecast.
Fannie Mae posted its smallest loss in three years as the government-sponsored enterprise and leader in the secondary mortgage market had lower credit expenses.
And Berkshire Hathaway shares slipped ahead of the company's earnings report, scheduled for after the closing bell.