Selloff slows on Wall Street

NEW YORK (CNNMoney.com) -- Stocks pared some losses but remained considerably lower Friday, continuing Thursday's steep selloff, as investors mulled more credit market woes and a jump in the price of oil.

The Dow Jones industrial average (down 86.81 to 13,386.76, Charts) was down about 120 points, or 0.9 percent with 2-1/2 hours remaining in the session after falling about 150 points earlier. The broader S&P 500 (down 10.78 to 1,471.88, Charts) slipped 0.7 percent while the tech-fueled Nasdaq composite index (down 22.74 to 2,576.60, Charts) lost roughly 0.8 percent.

Treasury bonds again moved higher after rallying Thursday as investors again sought shelter from falling stock prices while higher oil prices pressured equities.

"You have all these worries out there," said Warren Simpson, managing director at the Little Rock, Ark.-based Stephens Capital Management. "Between the subprime situation and the price of oil and consumer spending - and throw housing over everything - you've got a nervous market."

Credit market fears and more troubling news from the housing sector sent stocks tumbling Thursday, with the Dow falling 311 points - its second biggest point loss so far this year.

More troubling news emerged Friday after the Britain-based snack and drinkmaker Cadbury Schweppes (up $0.54 to $48.98, Charts) delayed the sale of its North American beverage unit, which produces Dr. Pepper and Snapple, citing recent turmoil in the debt market.

Not including the Cadbury announcement, there have been roughly 20 buyout-related debt deals that have been postponed as credit markets have tightened.

Investors around the world have been rattled by signs of tougher conditions in credit markets, since tighter credit is likely to slow the buyout boom that's helped prop up stock prices. And it could raise the cost of borrowing for companies, hurting corporate earnings.

The Dow selloff, which has cut the index's gain to about 8 percent for the year, paused briefly after Treasury Secretary Paulson said in a televised interview that the U.S. economy is the strongest he has seen in several decades, helped by growth outside the U.S.

His comments came after the Commerce Department reported the economy grew at a faster-than-expected pace of 3.4 percent in the second quarter, while a key inflation reading came in tamer than expected.

In other economic news, the University of Michigan reported an uptick in consumer sentiment in July in its monthly survey, although the reading fell short of estimates.

On the earnings front, Chevron (down $0.64 to $86.82, Charts, Fortune 500) reported improved quarterly earnings, while leading biotech Amgen (down $0.80 to $55.36, Charts, Fortune 500) reported a better-than-expected gain in earnings after the closing bell Thursday.

In corporate news, Gap (up $0.68 to $17.59, Charts, Fortune 500) announced late Thursday that it had named Glenn Murphy as the company's new CEO, sending shares of the apparel maker nearly 4 percent higher

Shares of the spinal-products maker Kyphon Inc. (up $13.30 to $66.98, Charts) soared nearly 25 percent after fellow devicemaker Medtronic (down $0.14 to $50.78, Charts, Fortune 500) said it agreed to buy the company for $3.9 billion.

Market breadth was negative as losers beat winners by more than 2 to 1 on the New York Stock Exchange on volume of 1.25 billion shares. Decliners topped advancers on the Nasdaq by the same ratio on volume of 1.64 billion shares.

Treasury bonds climbed again after a big run up Thursday, with the 10-year note yield at 4.76 percent, down from 4.78 percent in the previous session. Bond prices and yields move in opposite directions.

The dollar eased versus the euro and the yen.

Oil prices jumped above $76 a barrel and remained higher with U.S. light crude up $1.15 to $76.10 a barrel on the New York Mercantile Exchange.

COMEX gold for December fell $4.10 to $671 an ounce.

The triple-digit loss also pummeled stocks overseas as Asian markets finished sharply lower. In Europe, stocks seesawed before finishing lower.