Dow rises after jobs report
Blue chips gain as payroll decline meets expectations and interest rates rise in Europe. But Nvidia drags on techs.
NEW YORK (CNNMoney.com) -- The Dow gained Thursday, with recently battered blue chips bouncing back, but the broader market was mixed as investors considered a weak June jobs report and a rise in interest rates in Europe.
The Dow Jones industrial average (INDU) gained 0.7%, thanks to a bounce in GM and bank stocks such as JP Morgan Chase.
The broader Standard & Poor's 500 (SPX) index rose 0.1%. The tech-heavy Nasdaq composite (COMP) lost 0.3%, with a nearly 31% slump in chipmaker Nvidia exerting pressure.
Thursday was a shortened session, with trading ending at 1 p.m. ET. All financial markets are closed Friday for the Fourth of July holiday.
All three major gauges posted declines for the abbreviated week. The Dow lost 0.5%, the S&P 500 lost 1.2% and the Nasdaq lost 3%
Stocks fell Wednesday, with the Dow and Nasdaq ending in bear market territory - a drop of at least 20% off the October highs. The decline was sparked by record oil prices, a 15% slump in GM stock and jitters about Thursday's two big developments - the June jobs report and the European Central Bank's (ECB) interest-rate decision.
But the jobs report was mostly in line with forecasts and the dollar seemed to withstand the rise in rates, enabling stocks to stabilize Friday. A report on the services sector of the economy showed continued weakness.
Job losses continue: Employers cut jobs from their payrolls in June for the sixth month in a row, the government said, providing clear evidence that the labor market remains strained.
But the loss of 62,000 jobs was roughly in line with forecasts for a decline of 60,000, according to a Briefing.com survey. Job losses in May were revised to 62,000 from an initial reading of 49,000.
The unemployment rate, generated by a separate survey, held steady at 5.5%, versus forecasts for it to slide to 5.4%. Average hourly earnings, the report's inflation component, rose 0.3%, as expected. (Full story)
"We're seeing continued deterioration," said Gregory Miller, chief economist at SunTrust Banks. "This is the sixth month in a row that payrolls have declined and unemployment is showing upward momentum."
Meanwhile, the weekly jobless claims report, a separate indicator, rose more than expected, with the number of Americans filing new claims for unemployment jumping to 404,000 last week.
Miller said that if you combine the steady unemployment rate, which was exacerbated by a smaller labor force, with the weekly claims number, which reflects the momentum at the end of the second quarter, the outlook is pretty bleak.
"I suspect we'll continue to have job losses of this magnitude or greater as we move into the summer or the fall," he said.
A separate report, the Institute for Supply Management's services sector index, fell to 48.2 in June from 51.7 in May. Economists thought there would be a narrower slip to 51. Any reading below 50 indicates weakness.
Interest rates and the dollar: The ECB lifted its main interest rate to 4.25% from 4% in a widely expected move. However, the euro showed little reaction, with currency traders having already anticipated the hike in rates and some even looking for a bigger boost to 4.5%.
The dollar rose versus the euro and the yen Thursday.
Many economists have been concerned that rising rates in Europe will boost the euro, hurt the dollar, and ultimately drive dollar-traded commodity prices even higher.
In addition to the ECB, Sweden again lifted its key interest rate Thursday. Two central banks lifting rates shows a shift in momentum, Miller said.
And he believes that momentum is going to hammer the dollar and boost oil prices, particularly if the Federal Reserve keeps delaying a boost in its benchmark fed funds rate, currently at 2%.
The Fed opted to hold rates steady last month - ending a lengthy cutting campaign - with inflationary concerns countered by sluggish growth.
Fuel prices rise: U.S. light crude oil for August delivery rose $1.72 to settle at $145.29 on the New York Mercantile Exchange after hitting an electronic trading record of $145.85 earlier. (Full story).
Prices have already risen more than 50% this year in response to tight supply and tensions in the Middle East.
The national average price for a gallon of regular unleaded gas rose to a record $4.098 from the record $4.092 the previous day, according to AAA. (Full story).
Company news: GM (GM, Fortune 500) gained 1.4%, after plunging 15% Wednesday to a near 54-year low following an analyst downgrade that raised worries about its cash position and the possibility of bankruptcy.
Nvidia (NVDA) shares slumped almost 31% in early trade after warning late Wednesday that current-quarter sales won't meet forecasts due to slower global demand. The graphics chipmaker also said its gross margin - a key measure of profitability - won't meet forecasts.
Financial shares were mixed, with JP Morgan (JPM, Fortune 500), Lehman Brothers (LEH, Fortune 500) and Washington Mutual (WM, Fortune 500) among the gainers and Comerica (CMA) and Zions Bancorp (ZION) among the losers.
Market breadth was negative and the volume was modest, with many traders leaving early to get a jump on the weekend. On the New York Stock Exchange, losers beat winners two to one on volume of 930 million shares. On the Nasdaq, decliners topped advancers eight to five on volume of 1.42 billion shares.
Other markets: In the bond market, Treasury prices slipped modestly, raising the yield on the benchmark 10-year note to 3.97% from 3.96% late Wednesday. Bond prices and yields move in opposite directions.
COMEX gold for August delivery fell $12.90 to $933.60 an ounce. 
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