"Economic reports haven't been all that good this past week," said Robert Pavlik, chief investment officer at Oaktree Asset Management. "Now that earnings season is largely over, attention is turning back to oil and more fundamental reports."
Crude oil futures initially jumped over $4 to trade above $128 amid fresh concerns over a possible Israeli strike on Iran. Crude recently shed some of these gains as fears waned, but remained above $124.
The Dow Jones Industrial Average dipped 33 points, or 0.3%, to 11,344, with 18 of its 30 components retreating. Among blue chips, shares of General Motors Corp. fell 3% after the auto maker posted a $15.5 billion loss.
The S&P 500 index dipped 5 points to 1,261, while the Nasdaq Composite fell 11 points to 2,313, after posting strong gains this week and rising in July.
Among technology shares, Yahoo dipped 0.5% after chairman Roy Bostock, speaking to shareholders at Yahoo's shareholder meeting, again defended its board's handling of Microsoft Corp. failed bid to acquire the Web portal.
Trading volumes showed 793 million shares trading on the New York Stock Exchange and 623 million shares trading on the Nasdaq stock exchange. Declining issues topped gainers by 8 to 7 on the NYSE, while decliners slightly topped gainers on the Nasdaq.
Utilities, materials, health care, information technology and telecoms, all gainers in July, led the way lower. The financial sector led the gains, followed by energy.
Nonfarm payrolls fell by 51,000 in July, the seventh straight month in July, while the unemployment rate jumped to 5.7%, a four-year high, the Labor Department reported Friday.
Since December, 463,000 jobs have been lost, the strongest signal that the economy is in a recession. Economists surveyed by MarketWatch expected payrolls to shrink by 70,000 and for the unemployment rate to rise to 5.6% from 5.5% in June.
Also, the Institute of Supply Management said its manufacturing index stood at 50.0% in July, above expectations for a 49.5% reading.
Elsewhere, Elan plunged 44% and Biogen Idec shares slid 25% after the companies said their multiple sclerosis drug Tysabri was linked to two new cases of a rare and often fatal brain inflammation.
The drug had been taken off the market briefly after its 2004 Food and Drug Administration approval after three deaths from PML had been linked to the drug. Tysabri was allowed back on the market in 2006 after no other cases had been identified.
Schering-Plough fell 4% as the FDA gave it a "not-approvable" letter for Sugammadex, an injection to reverse muscle relaxation during general anesthesia.
By Nick Godt