Stocks Slip After Jobs Report

The Labor Department reported that the American economy last month added more jobs than expected, easing investors’ fears that the country was slipping into recession. But Fitch downgraded its rating on the government debt of Spain and Italy, sending the stock market and the euro marginally lower in afternoon trading.

The Standard Poor’s 500-stock index closed down 0.8 percent, while the more narrow Dow Jones industrial average fell 20.21 points, or 0.2 percent, to 11,103.12. The technology-heavy Nasdaq composite index lost 1.1 percent. Yields on 10-year United States Treasury bonds rose to 2.06 percent.

The Labor Department said that American employers added 103,000 jobs in September, while the unemployment rate remained at 9.1 percent. Some investors pointed to gains in average hourly earnings and an uptick in hiring of temporary workers as signs in the report of an improving outlook in the labor market.

Still, economists cautioned that the numbers were weak and noted that the report seemed positive only in light of low expectations.

The jobs report shows an economy that is “neither reaccelerating nor shifting into recession,” wrote Steve Blitz, senior economist for ITG Investment Research, in a report to investors. Mr. Blitz said the American economy remained particularly vulnerable because of its reliance on exports during a time of global economic uncertainty.

“The employment data in the coming months should be more of the same, which isn’t much, and if growth starts to decelerate more rapidly around the world, negative jobs numbers are more likely than not,” he wrote.

The jobs report, coupled with somewhat optimistic reports on same-store retail sales and auto sales for September, quelled fears of an immediate recession, said David Kelly, chief market strategist for JPMorgan Funds, but traders were likely cashing in on gains from earlier in the week.

“With this dollop of good news, it’s natural for people to take money off the table,” he said. “But when you’re investing, rather than trading, you do need to look at the fundamentals. The fundamentals do justify both higher interest rates and higher stock prices than prevail today.”

Fitch downgraded its rating on Italian debt by one level, following similar moves by the other major rating agencies in recent weeks. It also lowered its rating on Spain two levels. In both cases, the agency cited concerns about debt coupled with low growth. The outlook on both countries was negative.

The move weighed on Wall Street, particularly on banks, whose exposure to the debt crisis in Europe is unclear. Shares for JP Morgan slipped 4.1 percent, Citibank shares dropped 3.9 percent and Bank of America dropped 4.3 percent.

The value of the euro also fell in the wake of Fitch’s action, to $1.3385 from $1.3437.

Marc Chandler, an analyst at Brown Brothers Harriman, said that investors would continue to put more weight on the situation in Europe than on the domestic economy.

“The U.S. is not the crosshairs,” he said. “Europe is in the crosshairs.”

European markets, which closed before the downgrades, were moderately higher. Governments there are simultaneously contemplating making banks take a bigger write-down on Greek debt, taxing their financial transactions and boosting their capital base.

The Euro Stoxx 50 index of blue chip shares closed up 0.9 percent for the day and 4.1 percent for the week. The FTSE 100 in London gained 0.2 percent to end the week up 3.4 percent, while the DAX in Frankfurt gained 0.5 percent on Friday and 3.2 percent for the week.

In another downgrade, Moody’s Investors Service cut its ratings on 12 British financial institutions, including Lloyds TSB Bank and Royal Bank of Scotland, saying that it believed they were less likely to be bailed out than European banks in the event of their failure. Lloyds shares were down 2.7 percent, and the Royal Bank of Scotland were down 3.3 percent.

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