Stocks stuck in the red

NEW YORK (CNNMoney.com) -- A pair of troubling economic reports and a rating cut of Wall Street bank Bear Stearns helped send stocks lower Friday, although major gauges moved off their lows by midday.

The Dow Jones industrial average (down 63.40 to 13,399.93, Charts) fell 56 points, or 0.4 percent, about 2 hours into the session after falling by as much as 124 points.

The broader S&P 500 (down 10.19 to 1,462.01, Charts) slipped 0.6 percent, while the Nasdaq Composite index (down 17.29 to 2,558.69, Charts) lost about 0.6 percent.

"The news that we see today may not be all that negative," said Dean Barber, owner and president of the Kansas City-based Barber Financial Group. "The main thing that is driving the market is people are unwilling to commit."

After an early dip, the market selloff accelerated Friday after credit rating agency Standard & Poor's lowered Bear Stearns debt rating to "negative" from "stable," citing the recent troubles in its managed hedge funds, some of which were invested in bonds linked to subprime mortgages. Bear Stearns (down $5.52 to $110.11, Charts, Fortune 500) shares slipped nearly 5 percent on the New York Stock Exchange.

Other financials were also lower in midday trade, including Goldman Sachs (down $3.86 to $183.60, Charts, Fortune 500) and Morgan Stanley (down $1.08 to $62.80, Charts, Fortune 500).

The KBW Bank Index (down $1.44 to $104.72, Charts) was nearly 2 percent lower while the AMEX Securities Broker/Dealer index (down $2.98 to $221.72, Charts) slipped more than 2 percent.

After rallying in the last two days, stocks retreated at the start of Friday's session following a disappointing employment report, which revealed that U.S. employers added fewer jobs than anticipated in July.

Adding to the negative tone was a weaker-than-expected reading on service sector growth in a report published by the Institute for Supply Management.

In corporate news, American Home Mortgage said it would shut down and cut nearly 7,000 jobs after lenders had cut off credit.

Shares of Accredited Home Lenders (up $0.51 to $5.82, Charts) rebounded after a steep selloff a day earlier, on news that it will attempt to complete its buyout by the private equity firm Lone Star. On Thursday, the company said it was not certain it would continue to operate because of adverse conditions of the subprime mortgage market.

Take-Two Interactive Software (down $2.40 to $14.51, Charts) warned after the bell Thursday that it would delay its most important upcoming video game, "Grand Theft Auto IV," and that it would post a full-year loss. Shares plunged more than 14 percent lower in morning trade.

On the earnings front, consumer-products maker Procter & Gamble (down $0.49 to $62.81, Charts, Fortune 500) reported better-than-expected quarterly results, but warned that its earnings for fiscal 2008 would fall short of Wall Street expectations.

The No. 1 automaker, Toyota Motor (up $0.91 to $119.50, Charts), reported better than expected profits after the close of trading in Tokyo.

Oil prices fell below $76 a barrel, as the price of U.S. light crude lost $1.21 to $75.65 a barrel on the New York Mercantile Exchange.

Treasury prices jumped on the jobs and ISM report, taking the yield on the 10-year note to 4.72 percent from the 4.77 percent level reached late Thursday.

Overseas, European stocks fell in afternoon trade, while Asian markets finished the session mostly higher.

The dollar fell against the euro and the yen.

COMEX gold for December gained $5.20 to $681.80 an ounce.