Stocks dip after data on inflation, production

Stocks fell sharply Friday, taking the major indexes down about 1%, amid indications that consumers may keep cutting back their spending as they worry about losing their jobs.

Still, the indexes finished well off their lows of the day, a sign that the mood on Wall Street isn’t all that grim, and light volume probably skewed price changes.

Investors also sold off oil and other commodities and moved their money into the relative safety of the dollar and government bonds. Treasury prices jumped, sending their yields lower, while the dollar rose against major currencies.

After rallying for months on expectations of an economic recovery, investors are worried that they have been too optimistic, given consumers’ continuing reluctance to spend. Analysts are predicting that the market may be rocky for some time.

The Dow Jones industrial average fell 76.79, or 0.8%, to 9,321.40 after falling as much as 165 points after the release of the Reuters/University of Michigan index of consumer sentiment, which fell significantly short of expectations for the first part of August.

The S&P; 500 index fell 8.64, or 0.9%, to 1,004.09, while the Nasdaq composite index fell 23.83, or 1.2%, to 1,985.52.

The drop erased much of the market’s advance of the last two days, and gave the big indexes their first losing week after four weeks of gains.

The Dow was down 0.5% for the week, while the S&P; 500 index fell 0.6% and the Nasdaq was off 0.7%.

About five stocks fell for every two that rose Friday on the New York Stock Exchange, where consolidated volume came to a light 5 billion shares, down from 5.3 billion a day earlier.

Light volume can exaggerate the market’s movements.

In other trading, the Russell 2000 index of smaller companies fell 11.29, or 2%, to 563.90.

Bond prices rose sharply. The yield on the benchmark 10-year Treasury note, which moves opposite its price, fell to 3.55% from 3.59% late Thursday.

The drop in the 10-year yield is good news for consumers because it is closely tied to interest rates on mortgages and other loans.

On the New York Mercantile Exchange, gold and other metals prices fell, while oil prices sank $3.01 to $67.51 a barrel.

Investors have sent markets higher this summer, encouraged by improvements in housing, manufacturing and corporate profits. But without the support of the consumer, the recovery is in question.

“I think you’re going to need to see a material stabilization in labor markets before you get meaningful and stable consumer confidence,” said Stephen Wood, chief market strategist at Russell Investments. “And we’re certainly not adding jobs and we’re not even at a point where jobs are no longer being lost.”

Overseas, Asian markets were mostly higher, with Japan’s main index hitting a 10-month high amid mounting optimism about a global economic recovery. The Nikkei stock average rose 0.8%.

European markets gave up early gains and finished lower. Britain’s FTSE 100 dropped 0.9%, Germany’s DAX index fell 1.7% and France’s CAC-40 lost 0.8%.