NEW YORK -- Blue-chip stocks resumed their slide Friday, as a strong report on U.S. employment solidified Wall Street's belief that the Federal Reserve will raise interest rates later this month.
At the close of trading, the Dow Jones industrial average was down 79.79 at 10,714.03, erasing more than half its 119-point gain on Thursday.The blue-chip index ended a choppy week 58.08 points higher, a gain of 0.5 percent.
Broader stock indicators like the Standard & Poor's 500 index and the NASDAQ composite index fell modestly today, capping a week of steep losses.
Stocks tumbled after the Labor Department reported employers added a larger-than-expected 310,000 jobs to their payrolls in July and that average hourly earnings, a key gauge of inflation pressures, rose 3.8 percent from a year ago.
Investors have grown increasingly worried that tight labor markets will force the Federal Reserve to raise interest rates as a pre-emptive strike against inflation. Higher interest rates cut into corporate profits by raising the cost of borrowing.
"If the Fed needed fuel to consider raising rates, they have it now with these new numbers," said Alan Ackerman, senior vice president at Fahnestock & Co. "The strong jobs report tilted the optimists upside down."
The Labor Department also reported the unemployment rate remained at 4.3 percent last month, near a three-decade low.
"That pace of job growth in unacceptable to the Fed," said Bruce Steinberg, chief economist at Merrill Lynch.
Bond prices fell sharply on the report, pushing the yield on Treasury's 30-year bond up to 6.15 percent from 6.04 percent late Thursday.
Interest rate concerns hurt financial services stocks as J.P. Morgan and Morgan Stanley Dean Witter fell. Those businesses would see lending volume shrink if higher interest rates made it more expensive to borrow money.
"The stock market is trying really hard to fight reality right now -- interest rates will probably be rising," said Brian G. Belski, chief investment strategist at George K. Baum & Co., in Kansas City, Mo. "But some sectors can't escape the selling pressure."
While the broad market was down, bargain hunters were buying certain technology issues, most notably semiconductor stocks. Strong forecasts for personal computer sales have supported the stocks of companies that make computer parts.
Internet companies, which rallied sharply Thursday, struggled once again. Yahoo! slipped back from early gains despite a ratings upgrade from Goldman Sachs. America Online also struggled to hold on to a gain.
EBay, the online auction site, plunged as its system shut down.
While most market indexes ended the week fairly flat amid low volume, trading was volatile throughout the week.
"It's tough to call all the turns in this market," Ackerman said. "It is like the Indianapolis 500. Everything keeps changing lap after lap.