“Even though unemployment went down, the number of jobs available did too, and that’s really key,” said Mike Kayes, chief investment officer at Eastover Capital in Charlotte, N.C. “Investors have been looking for when the economy can create jobs, and it hasn’t yet.”

The Dow closed down 79.83, or 0.9 percent, at 9,153.97, more than wiping out a 33-point gain in the previous session that marked its fifth straight winning month.

The broader market also declined. The Nasdaq composite index fell 19.43, or 1.1 percent, to 1,715.59, having notched a six-month winning streak. The Standard & Poor’s 500 index lost 10.16, or 1 percent, to 980.15, after it posted a fifth month of gains yesterday.

For the week, all three main gauges finished lower, with the Dow losing 1.4 percent, the Nasdaq lower by 0.9 percent and the S&P declining 1.9 percent. The Nasdaq and S&P posted their second losing week in three.

The Labor Department reported the nation’s unemployment rate declined to 6.2 percent in July from 6.4 percent in the previous month. The figure was slightly better than analysts’ estimates, but much of the drop came from 470,000 disenchanted people who abandoned job searches.

Meanwhile, the Institute for Supply Management said its manufacturing index rose to 51.8 in July from 49.8 in June. A reading above 50 indicates expanding manufacturing. Analysts had predicted a July reading of 52.0.

Trading has been choppy in recent weeks as investors, having sent stocks surging since mid-March, are now seeking proof of a strong economic recovery. Many investors believe employment in particular must show clear improvement for the rebound to continue.

“There was no real hurrah in the reports today to keep the market sustained in its current overbought condition,” said A.C. Moore, chief investment strategist for Dunvegan Associates in Santa Barbara, Calif.

“The market in the very short term is governed by investor sentiment, which moves from a glass half-full to a glass half empty to a glass half full,” he added. “We think the market will move to a half-empty stage before making another move.”

Kayes agreed. “For the overall market to move forward, we need clear signs the economy is getting better,” he said. “Even though second-quarter earnings were by and large decent, top-line growth wasn’t really there.”

Johnson & Johnson dropped $1.36 to $50.43 after Merrill Lynch cut the company’s stock rating to “neutral” from “buy.”

ChevronTexaco declined $1.06 to $71.05 after the oil company reported quarterly operating profits that handily beat Wall Street’s expectations.

Gainers included Disney, up 60 cents to $22.52, and Altria Group, up 27 cents to $40.28.