U.S. Stocks Reverse Course, Trade Mixed; Financials Lower

NEW YORK (MarketWatch) -- U.S. stocks on Friday shed earlier gains with investors funneling money into the perceived safety of Treasurys instead, as anxiety about financial stocks overshadowing a surprisingly strong October jobs report and an unexpected rise in factory orders.

"As fears about the banking sector become more pervasive, the 'up in quality' trade from risky assets to Treasurys will likely become more popular as we end the week," said Kevin Giddis, managing director in charged of fixed income at Morgan Keegan & Co.

The Dow Jones Industrial Average was down about 0.5% at the 13,500 mark, with the blue-chip benchmark's financial components among those hard hit.

Specifically, J.P. Morgan Chase fell 3.6%, while American International Group gave up 3.5%, American Express Co. traded down 2.1%; and Citigroup Inc. declined nearly 2%.

The S&P 500 fell 5.83 points to 1,502.61.

Bucking the trend, the Nasdaq Composite advanced 5.31 points to 2,800.14.

Volume on the New York Stock Exchange came to 425 million, with declining issues topping those advancing 3 to 2. On the Nasdaq, 674 million shares exchanged hands, and decliners edged just ahead of advancing stocks.

Analysts at Action Economics noted fresh worries about a balance sheet cover-up at Merrill and lower guidance from Barclays." U.S.-listed shares of Barclays dropped more than 5%.

Also lower, shares of eBay Inc. fell more than 2%. Bear Stearns downgraded the online auctioneer to peer perform from outperform.

Safe havens

On the data front, the Labor Department reported the economy created 166,000 jobs in October, helping investors brush aside lingering fears over weakness in the housing and credit sectors. The growth in nonfarm payrolls marked the best showing since May, with the unemployment rate holding steady at 4.7%. .

Later bullish data failed to turn the market's slide, with investors bypassing word from the Commerce Department of an unexpected rise in orders for U.S.-made factory goods, with rose 0.2% in September, as opposed to the anticipated 0.7% decline. .

Against this backdrop, the benchmark 10-year Treasury note was up 10/32 at 103 15/32, its yield at 4.313%.

In commodities trading, crude-oil and gold futures both moved the upside.

Crude for December delivery gained $1.39 to stand at $94.88 a barrel, while the benchmark gold contract climbed $3.80 to $797.50 an ounce.

Overseas action

European shares moved off their Friday lows in afternoon dealings, playing off the better-than-expected U.S. jobs data, although banks such as Dexia and Barclays continued in the red amid worries about exposure to troubled U.S. home loans. .

In Asia overnight, stocks fell sharply, led by financials as renewed concerns about the health of credit markets dragged Japan's Mitsubishi UFJ Financial Group, Australia's Macquarie Bank and Singapore's DBS Group Holdings, among others, lower.

On Thursday, U.S. stocks fell sharply, with the Dow industrials falling more than 360 points. Among other things, a downgrade of blue-chip bellwether Citigroup Inc. revived concerns about the financial sector.

By Kate Gibson