Stocks, dollar fall after weak U.S. jobs report

NEW YORK - A disappointing jobs report sent investors out of stocks and the dollar Friday and into assets perceived as being safer. Foreign currencies and gold rose, as did bond prices, which sent interest rates lower. The yield on the two-year Treasury note hit a record low.

Stocks sank for most of the day but pared their losses in late-afternoon trading. The Dow Jones industrials ended down 21 points after being down as much as 160 earlier in the day.

A closely watched monthly employment survey from the Labor Department confirmed what investors have been fearing: The U.S. economic recovery is weakening. Private job growth was just 71,000 in July. That's below what analysts had hoped for and far shy of the level that would be needed to reduce the unemployment rate, which remained at 9.5 percent.

It was the latest sign that a slowdown in U.S. growth is the real problem with the global economy, not the European debt crisis that had financial markets in a tizzy for much of the spring.

It's not yet clear whether Friday's downturn was a sign of more trouble to come or just a temporary setback on a generally upward trajectory for the market.

Job creation has a huge effect on the rest of the economy, influencing how much people spend on cars, clothes, travel, and even homes. The latest report confirmed that many employers are still reluctant to hire.

The Dow Jones industrial average closed down 21.42 points, or 0.2 percent, at 10,653.56.

The Standard & Poor's 500 index fell 4.17, or 0.4 percent, to 1,121.64, while the Nasdaq composite index fell 4.59, or 0.2 percent, to 2,288.47.

While stocks took a turn lower, bond investors had already been anticipating that the economy was headed for trouble. Even while the stock market was surging ahead in early June and then again for most of July, yields on Treasury notes have been heading steadily lower since early April as more money flows into ultrasafe Treasurys.

Gold, which often moves in the opposite direction of the dollar, rose $6 to $1,205.30 an ounce. It's the first time gold prices have closed above $1,200 since July 15.